Alberta's most optimistic economist has capitulated. Todd Hirsch, chief economist with provincially owned ATB Financial, says Alberta is in a mild recession this year.
"I have changed my tune. The last forecast we came out with we put together in June. At that point we were still calling for very, very modest growth. But since the end of June the situation has changed very significantly," Hirsch told CBC News.
This has been a difficult summer for commodity markets, with oil prices testing news lows under $40 US a barrel, as oversupply combines with significant concerns over the source of future demand.
That's a big change from the spring when it looked as though $60 US oil might be sustainable, he said.
"The metaphor I'm using right now is Wile E. Coyote. He runs off a cliff and is still hanging there for a second or two and he thinks he might be OK and then he realizes that he's not OK. And that's what happened to oil prices," Hirsch said.
'These low oil prices are not just Alberta's problem, it's Canada's problem and I think Canada's economy is going to struggle under the weight of that' - ATB economist Todd Hirsch
Hirsch doesn't expect the recession to be as severe as it was in 2009, when Alberta's economy contracted by 4.5 per cent. He expects a decline of between one and two per cent, which is roughly in line with private-sector economists' forecasts.
Alberta's NDP government is back in session in October and expected to table a budget shortly thereafter. Hirsch says that budget will be characterized by a lot of red ink.
"It's going to be very very difficult for the government to even pretend that we're going to be in surplus any time soon," he said. "The only way we're going to move to a balanced budget is with very, very dramatic cuts to government spending or extremely high increases in tax revenue."
At a provincial byelection event this week, Alberta Premier Rachel Notley was asked about the budget. She did not signal any big cuts or tax increases are in the works.
A careful balance for Notley
"We know that we have to engage in a very careful balancing of the obligation to spend in a careful, considered, measured way, with the understanding that our revenues have gone down even more than the original Prentice budget had projected," Notley said.
Alberta's woes will also have an impact on the federal budget, which depends on corporate tax revenue from the the oilpatch.
"It's not good for the rest of the country either," Hirsch said.
"I keep emphasizing these low oil prices are not just Alberta's problem, it's Canada's problem and I think Canada's economy is going to struggle under the weight of that."