ATB’s economic forecast for Alberta becomes more optimistic

Russian invasion of Ukraine and rising oil prices helped boost Alberta’s GDP

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Alberta is poised for a better-than-expected economic year, thanks in large part to the Russian invasion of Ukraine, but the conflict could have negative effects if it drags on.

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Rob Roach, ATB’s deputy chief economist, said Thursday that Alberta’s GDP is now expected to grow 5%, down from a pre-invasion forecast of 4.4%. Although he said the report is positive, there are headwinds.

Much of the positivity has been driven by an oil and gas sector that continues to beat expectations, largely due to the conflict in Ukraine which has strained global supplies and increased demand for oil and gas. from Canada.

“We think Alberta will have a decent year and overall economic growth, but it will vary for many different people, families and businesses,” he said. “It might not look like a particularly good year due to turbulence and still trying to recover from the last two years of the pandemic.”

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He said despite efforts to diversify Alberta’s economy, the province is still heavily dependent on oil and gas.

He cited venture capital investment in the technology sector and startups as an example. Despite a record $466 million investment in Alberta in the first quarter, it pales in comparison to pre-2014-15 capital investment levels in the energy sector.

“The amount of venture capital coming into the province is really a rounding error compared to the amount of capital investment the oil and gas industry spends each year,” he said. “It’s a good thing, but it highlights that the amount of economic boost we get from even a small increase in investment in oil and gas can really outweigh even a large increase in oil and gas. ‘other sectors’.

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Trevor Tombe, a professor of economics at the University of Calgary and a researcher at the School of Public Policy, estimated the amount of oil and gas investment before the collapse at around $40 billion to $50 billion a year.

Forecasts further predict that Alberta’s GDP growth will drop to 3.4% in 2023 and 2.7% the following year.

The report also projects Alberta’s annual unemployment rate at 6.7%, although the province currently sits at 5.9%.

Other challenges await us.

The conflict in Ukraine has also inflated the value of other commodities such as wheat, but gains in the agricultural sector have been largely offset by the rising cost of inputs such as fertilizers due to war and disasters meteorological.

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Inflation also continues to be a major problem. Roach said there is hope the Bank of Canada will raise the interest rate to help curb the rising cost of living, but that’s no guarantee.

“The fear is that if it doesn’t work, if it doesn’t also bring inflation down, we’ll have a situation where we’re actually reducing our economic output and slowing growth without much impact on inflation,” he said. -he declares. “It’s the worst case scenario.”

Tombe also said he did not expect Premier Jason Kenney’s decision to step down to knock the province off course.

“Government doesn’t matter as much as people think for the growth or contraction of the economy, they only matter at the margin – they can push things here or there,” he said. declared Grave. “It doesn’t matter who the premier is or who the ruling party is in the short term, and in an economy like Alberta, in particular, it’s going to go up and down depending on factors outside of the province.”

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Twitter: @JoshAldrich03

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