Alberta slipped into a recession last year and — with the turmoil of the COVID-19 pandemic continuing to roil — economic growth is expected to remain stunted in the months ahead.
Any hope that 2020 would be a year of economic recovery has been dashed by the health crisis, according to the latest outlook from ATB Financial.
“We were hoping, as many others were expecting, that 2020 would be a bit of a turnaround year, that we’d start to get out of the doldrums and start to see some decent growth,” Rob Roach, director of research for ATB’s economics and research team, said Wednesday.
Instead, Alberta is expected to fall into one of the deepest declines on record, a slump Roach expects will rival the depths of the 2009 recession.
“Unfortunately of course, as we all know, the pandemic came along and it has really reset all the dials,” he said in an interview with CBC Radio’s Edmonton AM.
“Things aren’t good. In fact, they’re brutal.”
‘Retroactive bad news’
According to figures released this week by Statistics Canada this week, Alberta’s economy shrank by 0.6 per cent in 2019 after posting a 1.9-per-cent GDP growth in 2018. Total output fell by $2.1 billion from $336.3 billion to $334.2 billion.
Output from the oil and gas drilling and field services sector plummeted by 22.2 per cent. Construction, manufacturing and retail also posted significant declines.
The average 2019 growth rate for Canada as a whole was 1.7 per cent. Only Alberta, Saskatchewan and the Northwest Territories experienced contractions.
In a report issued last December, ATB anticipated that GDP growth in 2019 would hit 0.4 per cent — well below the 20-year average of 2.8 per cent. At the time, ATB projected a slightly better 2020, with growth of 0.9 per cent.
“We got some retroactive bad news and it really shows you that three out of the previous five years our economy shrank, which isn’t a good thing by any means,” Roach said.
“There’s really no way around it. This is going to be a year of a deep recession and it will take another couple of years before we really fully recover.”
Growth in 2019 was largely stymied by a lack of oil pipeline export capacity, Roach said. The energy sector limped into the year, already bruised by an oil price crash. Pipeline bottlenecks aggravated investment uncertainty and led to deep cuts in capital spending.
Then, this spring, oil prices fell off a cliff. For days in March, the price of a barrel was cheaper than a pint of beer, signalling job losses and further cuts in spending.
The COVID-19 pandemic only made the situation worse. Alberta’s already weakened economy was walloped. Measures such as school and business closures, border shutdowns and travel restrictions severely curtailed economic activity.
While Statistics Canada doesn’t track quarterly numbers for each province, Canada’s economy shrank at an 8.2 per cent annual pace in the first three months of 2020, the sharpest quarterly drop since the financial crisis of 2009.
It will take some time to regain the ground we lost.-Rob Roach
Even as the economy cautiously begins to emerge from lockdown conditions, the pandemic will continue to take a toll on Albertans’ livelihoods, Roach said.
He expects unemployment numbers will remain high for months to come and that some businesses now reopening will not survive the year.
Alberta’s GDP in 2020 will end up well below where it was in 2019, he said. With all the uncertainty posed by the pandemic, putting a hard number on it would “do more harm than good,” he added.
Roach expects to see some growth return to Alberta in 2021 but the economy won’t recover until 2023.
“It will take some time to regain the ground we lost,” he said, “But I think there is still light at the end of the tunnel.”