In its Provincial Monitor report, BMO Capital Markets is predicting the province’s economy will grow at a two per cent pace in 2020 – second in Canada just behind nation-leading British Columbia’s forecast 2.2 per cent growth.
“Alberta’s economy remains sluggish, with real GDP growth likely slowing to 0.5 per cent this year from 1.6 per cent in 2018. Mandated oil production cuts have weighed on output this year, though the curbs have been rolled back to 125k bpd as of September 1st from as much as 325k bpd. This will help 2020 real GDP rebound two per cent,” said the report.
“Longer term, with oilsands production still on the rise, limited pipeline capacity will remain a pressing issue. New capital investment is expected to remain limited.”
The report said the housing market is soft but stabilizing, with prices in Edmonton and Calgary still drifting lower—each is down about 2.5 per cent year-over-year.
“Housing starts have found a footing, though well down from pre-shock levels. Commercial real estate also remains awash in supply with vacancy rates topping 24 per cent in Calgary’s downtown office segment. The labour market is steady, with job creation just enough to absorb growth in the labour force. The jobless rate has held steady below seven per cent, down from a recent peak above nine per cent, but well above pre-shock lows of 4.3 per cent,” said BMO.
“The first budget under the newly-elected United Conservative Party laid out a plan balance the books by FY22/23. This will lean on a heavy dose of spending restraint, the elimination of various tax expenditures and the assumption that WTI oil will gravitate toward the $63 level by that point. This is partly offset by a reduction in the corporate tax rate from 12 per cent to eight per cent by 2022, as well as scrapping of the carbon tax.”
The report forecast employment growth of 0.8 per cent next year in Alberta and the unemployment rate to remain steady at 6.9 per cent. Housing starts are expected to decline to 26,000 from 27,000 in 2019 and consumer prices will rise by 1.9 per cent – down from 2.1 per cent this year.
Earlier this week, the Conference Board of Canada forecasted the province’s economy will rebound in 2020 and 2021 with growth of 2.4 and 3.1 per cent respectively.
BMO predicts the overall Canadian economy will rise by 1.5 per cent this year followed by 1.7 per cent growth in 2020.
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