Slow and steady for 2015

THINK OUTSIDE THE BOX:  Although Alberta has become accustomed to outpacing the country in its annual growth rate over the last number of years, it appears Albertans will have to settle for being ‘equal’ to the rest of Canada in 2015 due to awkward oil prices and a bleaker employment picture that will likely cause a lower growth rate projected at 2% this year.

It’s not surprising that a reduction in the price of oil has made ATB Financial’s Economic Outlook of interest to so many Albertans. Released this week, it summarizes research collected on our province’s most important sectors, covering the first quarter of 2015. The economic portrait it paints definitely shows that a slowdown in 2015 is unavoidable. That said, our province is set to stay well in line with Canadian averages and is prepared to avoid an out-and-out recession.The Economic Outlook suggests that our energy sector has just started to absorb the impact of weak oil prices, which have been cut in half from last summer’s highs. In turn, many of Alberta’s crude oil producers are starting to face restricted cash flows. Prices are expected to stabilize by summer and fall within a more profitable range for our province and our producers ($US 55-70 per barrel).

Despite a weakened energy sector, there may be a silver lining for many non-energy related industries in our province. Forestry, agriculture and tourism will all benefit from discounted energy prices (i.e. fuel) and are set to do quite well during the course of 2015. A softer loonie will also help bolster these sectors.

All things considered, the most current projection by ATB Financial’s Economics and Research team is for Alberta’s real GDP to grow by a rate of 3.9 per cent in 2014. The rate of growth is expected to drop by nearly half to 2.0 per cent in 2015. Awkward oil prices and a bleaker employment picture will likely cause a lower growth rate for Alberta in 2015.

Watch ATB’s Chief Economist Todd Hirsch provide a brief overview (1:30 minutes in duration) of the Economic Outlook (Q1).

Nick Ford • Economist     January 8, 2015

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