Even if all goes well, Alberta economy won't rebound until 2023, says ATB Financial
Forecast shows a long road back to recovery that will depend on pandemic progress
Alberta's economy continues to sputter and isn't expected to exceed pre-pandemic levels until 2023, according to the latest forecast from ATB Financial.
The forecast, however, does predict a return to growth in 2021 after a dismal year that has seen the economy contract by 7.1 per cent.
It anticipates growth of 3.3 per cent in both 2021 and 2022.
Yet all those predictions hinge on two large what ifs.
"Our assumption is that a second wave of the virus will be economically disruptive, but to a lesser extent than what took place in the spring," reads the forecast.
"However, if the second wave leads to another lockdown in Alberta or other places, this will push GDP lower in 2020 with the negative effects spilling over into 2021. Our forecast also assumes that an effective vaccine will not be widely available until well into 2021."
The oilpatch factor
The other major factor facing Alberta is the oil price shock that struck with force in April.
While prices and demand have rebounded, the ATB forecast says the recovery remains soft.
"Crude oil and equivalents production in Alberta was 21 per cent (765,000 barrels per day) lower in May (the low point) compared to its pre-shock level in February," according to the report.
To that end, capital spending has plummeted.
"While still significant at $16.6 billion, capital spending in Alberta's oil and gas extraction sector is expected to be 30 per cent ($7.1 billion) below the already depressed amount spent in 2019 and 58 per cent ($22.8 billion) below the 10-year average," reads the forecast.
That spending is expected to remain low through 2021 even if prices and demand rebound.
Rob Roach, the managing director of research for ATB, said the impacts of the pandemic have been far reaching.
"It has been across the board, really no sector has been spared in this," he said.
"Grocery stores and some certain retail products — apparently hot tubs are flying out of stores — but overall where we really saw the biggest hits was in that service side of the economy where they had to shut down. Restaurants that had to close, of course, the tourism and travel industry, hotels, and they're still struggling, because, of course, public health restrictions are still in place."
Those gloomy figures likely won't help the employment situation in the province, which did add 9,700 jobs in August but is still down by 176,900 compared with the same month in 2019.
Even with those added jobs, the labour market contracted in August compared with July and June, and while the unemployment rate dropped, it was largely due to a decrease in people looking for work rather than a windfall of jobs.
Roach said ATB anticipates the unemployment rate to hold around 11 per cent into next year.
The one shining light in the forecast was the agriculture and agri-food sector.
A strong harvest is expected this year and crops saw growth despite the downturn.
Livestock didn't fare as well due in part to the outbreaks in meat packing plants and the subsequent lockdowns, but prices and demand have increased and the backlog in processing is shrinking.
Food manufacturing sales were up by seven per cent from last year as of July.