Alberta economy on track for most severe annual decline on record, national report predicts
'The provincial government is in a tight spot,' says Conference Board of Canada
Alberta's economy is going to shrink by an unprecedented 5.8 per cent this year because of the COVID-19 pandemic, according to the Conference Board of Canada.
But the board predicts in its preliminary spring forecast that Alberta's rebound in 2021 will be even sharper — with 6.1 per cent growth.
"With household spending expected to contract in the second quarter, providers of non-essential goods and services will see their revenues deteriorate and will be forced to lay off staff," the board's provincial outlook for Alberta says.
The report predicts Alberta's unemployment rate will average 11.3 per cent in 2020, compared with its previous estimate of 7.7 per cent.
The board notes that the collapse in oil prices — associated with the global economic shutdown and worsened by the Russia-Saudi Arabia price war — is amplifying the economic hardship for Alberta.
"The provincial government is in a tight spot. It has, appropriately, been deploying fiscal stimulus to mitigate against the sharp downturn in economic activity. At the same time, it must grapple with the evaporation of billions in royalty revenues on which it depends heavily," the reports says.
With West Texas Intermediate (WTI) prices hovering around US$25 to US$30 per barrel instead of US$58, as the provincial budget was counting on, Alberta's treasury is set to absorb a $6 billion loss in revenues, the board says.
Nationally, the board predicts the pandemic will result in the Canadian economy shrinking by 4.3 per cent in 2020.
And Canadian real GDP will drop by 25 per cent in the second quarter of this year.
"This will be the steepest quarterly decline in economic output on record, based on modern statistics that date back to 1961," the board said.