A forecast by Alberta Central projects the provincial economy will grow by 7.5 per cent this year
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Alberta’s economy should gain momentum and expand past its 2014 peak next year — bringing the jobless rate down with it — but the main risk is a potential fourth wave of COVID-19 infections, says a new report.
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A forecast released Thursday by Alberta Central projects the provincial economy will grow by 7.5 per cent this year.
It would be the highest rate in the country, as the report expects the national gross domestic product will expand by 6.1 per cent.
“However, it is important to note that there is more ground to gain back than elsewhere,” states the report by Alberta Central chief economist Charles St-Arnaud.
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“We forecast that the Alberta economy will start to expand beyond its 2014 peak at some point in 2022, erasing the contraction seen in 2015 after almost seven years.”
The new outlook comes as higher oil and natural gas prices, a strengthening housing market and a broader economic recovery take hold after a tumultuous 2020, although concerns are mounting over the recent rise in COVID-19 cases.
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Alberta saw the steepest economic decline in the country last year, with the dual impact of the pandemic and an unprecedented collapse in global oil prices. On Thursday, benchmark U.S. oil prices closed just above US$69 a barrel.
Higher commodity prices are assisting the province’s largest industry and St-Arnaud expects the value of all oil produced in Alberta will hit an all-time high this year.
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In April 2020, as production was shut in and prices crashed, the value of all oil produced in the province dipped below $1 billion, but the number likely rebounded to between $8.3 billion and $8.8 billion last month, he said.
“There are some very good tailwinds for the economy,” St-Arnaud said in an interview.
“The value of oil production in the province will hit a record in July; that’s almost a guarantee. It doesn’t mean suddenly oil companies will boom and start spending more on capital investment and rehire everyone. But it’s a positive push in the right direction.”
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While he doesn’t expect to see a hiring spree by petroleum producers, St-Arnaud believes sectors hit hardest by the pandemic, such as in the hospitality and tourism industry, will continue to bring jobs back.
The report projects the unemployment rate, which sat at 8.5 per cent last month, will drop to 6.7 per cent by the end of the year, and dip to 6.2 per cent by the end of 2022 — although still above the Canadian average.
Housing prices are expected to remain strong and disposable income levels will rise faster than in other parts of Canada, pushing up consumer spending levels.
A fourth wave of the pandemic remains the main downside risk to the forecast, as more cases of the highly transmissible Delta variant are recorded.
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On Thursday, the province reported 550 new COVID-19 cases, its highest number since May.
“The vaccination rate of some regions of the province remains worryingly low,” the report states, noting about a quarter of Albertans reside in a region where vaccination levels are below 60 per cent.
“There is a risk that some restrictions, at least at a local level, will need to be reinstated to slow a possible fourth wave, temporarily reducing the speed of the recovery.”
Some forecasts have pegged Alberta as leading the country in growth after the economy contracted by a staggering 8.2 per cent last year and thousands of jobs were lost.
The Conference Board of Canada recently projected Alberta’s economy will expand by 7.2 per cent in 2021, while RBC forecast Alberta’s GDP will grow by a more modest 5.9 per cent, slightly below the national average.
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“We are obviously seeing an extraordinary recovery taking hold this year, it’s just not quite enough to bring us back to where we were in 2019,” RBC economist Carrie Freestone said in an interview.
“We are still seeing 35,000 jobs that have yet to be recovered. But the fact Alberta is going ahead lifting restrictions, that is a positive.”
Calgary Chamber of Commerce CEO Deborah Yedlin said Alberta had a “bigger hole to dig out of” than other parts of the country but noted business sentiment is improving with the economy reopening. However, what happens next in the pandemic will be critical.
“Because we have had an opportunity to open up and able to do some things successfully, I think that is giving people some level of optimism,” Yedlin said.
“But the worst thing would be if we had to take it away again … We have had a taste of what is possible, and we have to continue to be mindful that the Delta variant doesn’t discriminate and could have other plans for us.”
Alberta's economy appears ready to burst past 2014 peak — COVID-19 is the wildcard - Calgary Herald
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