The economy of Calgary is expected to contract by two per cent this year but recover in 2010, growing by 1.2 per cent, according to an economic outlook released by the city.

The economic forecast also includes predictions that the while the population will grow by 23,000 people this year, a decreased demand for housing will continue to drive down the value of existing homes, as well as reduce building starts and building permit values.

"Calgary, like other global economies, will also see an economic contraction this year," city economist Patrick Walters said in a statement. "However, relative to other economies this contraction may not be quite as severe and increases are projected for 2010."

The forecast also calls for the unemployment rate in Calgary to "trend higher as job seekers from the rest of Canada are attracted to the region by a relatively lower unemployment rate."