Alberta recession could stretch into 2017, warn economists
Alberta’s recession is much deeper than originally thought and now economists are saying it’s possible the province’s economy could continue to contract into 2017.
Statistics Canada’s report on gross domestic product by industry shows much steeper-than-expected contractions in many of Alberta’s sectors. The province’s overall economy contracted by four per cent in 2015, following growth of 4.5 per cent in 2014.
The biggest declines were seen in oil and gas. Support activities for the sector saw a 38 per cent decline, while oil and gas engineering construction saw a 34 per cent. Economists note that the contractions, comparable with what was experienced during the 2009 recession, suggest Alberta’s economy could stay in recession for longer than originally thought.
“Our baseline assumption had been that Alberta would return to positive growth by 2017 but given the high possibility of more extensive spillover to the Albertan service-sector through the course of this year, the risk is for an even more protracted downturn,” said Jimmy Jean, senior economist at Desjardins Group.
While the four per cent GDP pullback was steep, it fell short of Alberta’s 2009 recession, which saw the economy contract by 5.3 per cent.
But like 2009, the current recession is seeing weakness spill over from oil and gas and into other sectors. StatsCan notes that both wholesale and retail trade fell for the first time since 2009.
The data show that much of Alberta’s industry is in decline, with manufacturing seeing a 6.9 per cent pullback as 13 of the 19 major industries fell.
Robert Kavcic, senior economist at BMO Capital Markets, points out that the province’s four per cent decline ends five straight years of Alberta outperforming the national economy. While the province contracted four per cent, Canada’s GDP grew by 0.9 per cent last year.
Most economists are forecasting that Alberta’s economy will contract again this year, with the median forecast of seven economists polled by Bloomberg calling for a 0.9 per cent decline in 2016.
The polled economists, however, expect that the Alberta economy will return to growth next year, calling for a 1.7 per cent rebound. Many economists, however, are likely to reassess their forecasts in light of the new data and the ongoing impact of the Alberta wildfires.
“The main take away is that Alberta’s recession was far deeper than most appreciated,” said Jean.