2017 could see highest GDP in Alberta since 1988
Alberta’s economy is set to lead the country this year, with robust economic growth of 6.7 per cent. Next year, however, the province will take a back seat to British Columbia, who will emerge once again as the provincial growth leader, according to The Conference Board of Canada’s Provincial Outlook: Autumn 2017.
“Thanks to rising oil production and a swift turnaround in drilling levels, Alberta surged out of recession this year. But, the rebound has been unsustainably fast, implying the pace of recovery will moderate in 2018,” said Marie-Christine Bernard, director, provincial forecast.
Alberta’s economy is set to grow by a robust 6.7 per cent this year. According to Trevor Tombe, an economist at the University of Calgary, this would be the highest real GDP growth since 1988.
The domestic economy also performed well, as consumer demand picked up, boosting retail sales and housing construction. But the booming growth is not expected to last, with Alberta’s economy forecast to grow at a more sustainable 2.1 per cent in 2018.
However, recent strength in oil prices could help maintain the momentum in drilling and push economic growth higher over the near term. The 2017 economic forecast was 3.1 per cent GDP growth, so it’s entirely plausible that Alberta could beat expectations again, according to Bernard.
British Columbia is forecast to enjoy real GDP growth of 3.2 per cent this year. And, while slightly weaker growth of 2.7 per cent is anticipated for 2018, B.C. will still outpace all other provinces in economic growth.
“Next year, with strength in many sectors, British Columbia’s economy is poised to outpace all other provinces and will be one of only three provinces with growth above 2 per cent,” said Bernard.
One of the factors behind the slowdown next year is the cooling off in the housing sector.
Measures implemented to cool demand and continued challenges related to housing affordability have led to a small decline in housing starts this year and they are forecast to remain virtually flat next year.
The cooling off in the housing sector will trickle down through the economy and lead to slower growth in employment, income, and, most significant of all, consumer spending.
Meanwhile, the province’s forestry sector is expected to be either flat or negative over the next five years due to ongoing problems with the mountain pine beetle infestations and duties imposed by the U.S. on Canadian softwood lumber imports.
Having faced a milder recession than Alberta’s in 2015 and 2016, Saskatchewan’s rebound this year will be more muted.
Real GDP in Saskatchewan is expected to advance 2.1 per cent in 2017 and by a more moderate 1.6 per cent in 2018. Labour markets remain stuck in neutral and are not powering consumer spending.
On a more positive note, prospects for the province’s primary sector are brighter. The potash industry is increasing production and global market conditions are improving, and that is expected to carry over into 2018.
The energy sector is benefiting from new technologies that are stimulating investment, and the recent strength in oil prices will help sustain the number of wells drilled in the province.
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