Any dark clouds that are currently hanging over Alberta will clear by 2014, paving the way for strong business and consumer activity, says a report by RBC Economics.
The bank’s latest Provincial Outlook, released Tuesday, said the province’s economy will continue its “impressive boom” through 2013, after leading the country’s economic growth in 2012, despite facing challenges.
RBC forecasts a provincial real GDP growth rate of three per cent due to strong crude oil production as well as high levels of capital investment, employment and population growth. This will be second in the country behind the 5.1 per cent growth expected in Newfoundland & Labrador.
RBC is predicting Alberta will lead the country in economic growth of 4.2 per cent in 2014.
In December, RBC forecast growth of 3.5 per cent this year for the province. The forecast for 2014 has remained the same.
“Even though the province recently announced a $2 billion budget deficit, Alberta is unquestionably in the midst of an impressive economic boom – particularly with capital investment fuelling manufacturing and wholesalers’ sales. Attractive employment opportunities are also bringing new migrants to the province, boosting population growth and in turn, consumer spending,” said Craig Wright, senior vice-president and chief economist at RBC. “As the economy continues to thrive across the majority of key industries, Alberta will remain at the top-end of Canada’s economic growth rankings this year.”
Economic growth in the province in 2011 was 5.1 per cent followed by 3.5 per cent last year.
Todd Hirsch, senior economist with ATB Financial, said Alberta’s economy is moderating somewhat.
“So I think we will see probably a slower year for growth than what we saw in 2011 or 2012,” said Hirsch. “A lot of that of course prompted by those softer energy prices and maybe a little bit of pullback by the provincial government. But I think we’re still going to see kind of a nice moderate healthy level of growth of around 2.5 to three per cent.
“Going forward beyond that it gets trickier and we don’t really do forecasts beyond 2013 but I would still see 2014 as a pretty good year … It’s not going to feel quite like the boom years of 2006, 2007 either. We’re just going to have nice healthy moderate growth.”
RBC said there are a few weak spots in Alberta’s economic outlook. Alberta investment intentions in the oil and gas sector are essentially flat for 2013. RBC said Alberta’s energy developers’ plans are being weighed down by rapidly rising energy production in the U.S., pipeline bottlenecks and the ‘bitumen bubble’, all of which contributed to lower crude oil prices in Canada relative to global benchmarks late in 2012.
“Weaker than expected oil prices put a multibillion dollar hole in Alberta government’s revenues, and led to a 2013 provincial budget that detailed renewed public sector spending restraint,” said Wright. “Still, any pullback in capital spending will be short-lived as pipeline issues are addressed and crude oil price relationships normalize.”
RBC trimmed its real GDP growth forecast for Canada to 1.8 per cent through 2013, following softer-than-expected growth in 2012. For 2014, it is forecasting 2.9 per cent growth across the country. In December, it forecast growth of 2.4 per cent this year and 2.8 per cent in 2014.
“After boasting a relatively strong economic performance over the past several years, Canada’s economy hit a speed bump in late 2012,” said Wright. “That said, financial conditions continue to support growth. As confidence recovers, business spending should accelerate, albeit at a less rapid pace than we saw in the early days of expansion.”