Alberta will have to brace for a historic economic decline this year caused by the COVID-19 crisis and the low oil price environment, says a report by the Conference Board of Canada.
“The Great Lockdown has dramatically shifted the economic landscape around the world. But in Canada, the impact has been most severe in Alberta. Just three months ago, we were projecting 2020 to be the first year of a long- awaited economic recovery in Alberta. Now, the province is eyeing its worst recession on record and a provincial deficit that will be paid off over a period in which the scale is measured in decades instead of years,” said the report.
“Real GDP in Alberta will contract 6.8 per cent in 2020, making its economy the worst-hit province in the country this year. Businesses in Alberta will have to endure one of the greatest drop in sales ever experienced . . . The impacts will hit hardest in the second quarter, when the province’s unemployment rate will average 17.4 per cent. With regulations limiting households in terms of the goods and services they are able to buy, the household savings rate will more than double—from 6.4 per cent in 2019 to 13.4 per cent this year—as real household consumption declines by a record 10.3 per cent.”
The Conference Board said oil and gas companies will struggle in 2020 as plunging world demand for oil, coupled with a brief price war among the OPEC+ members, has disrupted the balance of supply and demand and caused oil prices to tank.
“Producers shut in production, even at costly oil sands mines, as prices fell below the break-even prices for their operations. Although restrictions around the world are beginning to ease and demand for oil will gradually improve, oil and gas companies will be left licking their wounds for months to come as sky-high inventories across the world start to drop at only a sluggish rate, keeping prices weak,” added the report.