TORONTO, March 12, 2015 /CNW/ - Alberta's economy is expected to grow at
an anaemic pace in 2015, as persistent energy sector weakness and an
unfolding spill over into consumer confidence prompted RBC to revise
its 2015 real GDP forecast significantly lower - to 0.6 per cent from
2.8 per cent forecasted in December. According to the latest Provincial Outlook released today, RBC expects growth will pick up slightly to 1.1 per cent in 2016.
"Alberta saw a dramatic turn of events in recent months, as it became
clear that the steep drop in crude oil prices since mid 2014 would have
profound adverse repercussions for the province's energy sector," said
Craig Wright, senior vice-president and chief economist, RBC. "The
initial position of strength in the economy is likely sufficient to
keep the province in growth territory in 2015 though the risks of a
recession can't be dismissed."
Widespread capital spending cutbacks announced by energy firms since
late last year highlight the direct hit that the low oil price
environment will have on investment in Alberta this year, RBC says.
"Accounting for a quarter of economic activity in the province, a sharp
drop in non-residential business investment is expected to cut more
than 1.5 percentage points directly off Alberta's economic growth in
2015," said Wright.
RBC says lingering price uncertainty is also expected to have a clear
negative impact on drilling activity in the province, though producers
are expected to continue to generate non-conventional production as an
increasing number of new and expanded projects come online.
In addition, very strong job creation in recent years is likely to stall
in 2015 as recently announced layoffs by energy firms come into effect.
The province's labour markets have not yet shown signs of cracking,
although weaker employment prospects are reducing the incentives for
prospective workers to relocate to the province from other regions of
the country.
"Sustained weakness of this magnitude in migration trends will certainly
result in substantial slowing in population growth in 2015," added
Wright.
Widespread deterioration in Alberta's consumer confidence is most
evident in the potential boom-bust scenario currently being played out
in the province's housing market, RBC says. A cumulative 35 per cent
plunge in existing home sales in December 2014 and January 2015
accompanied the inventory of homes on the market surging to the highest
level since 2008.
"With little to bolster consumer confidence in the near-term, we
anticipate sharply lower housing resale activity overall this year,
which will set the stage for price declines. Sharp deterioration in
fiscal conditions could also have ripple effects on household
confidence in 2015," added Wright.
RBC notes the Alberta Premier has cautioned that a period of fiscal
restraint is imminent and revenue boosting initiatives, including tax
hikes, are likely to accompany significant program spending cuts as the
province deals with an estimated $7 billion budget shortfall in the
2015/2016 fiscal year.
The RBC Economics Provincial Outlook assesses the provinces according to
economic growth, employment growth, unemployment rates, retail sales,
housing starts and consumer price indices. The full report and
provincial details are available online as of 8 a.m. ET today at rbc.com/economics/economic-reports/provincial-economic-forecasts.html.
SOURCE RBC
