From Re-open to Re-build: Alberta's Economy 2022
By ATB Financial 12 November 2021
Alberta’s economy has come through the pandemic better than many of us may have expected, but the Delta variant and other risks still pose significant uncertainty. With reopening in the works, Alberta now needs to build on its strengths, repair the damage done and begin transforming and rebuilding its economy.
Walking us through these uncertain times is our resident economic guru Todd Hirsch, Vice-President and Chief Economist for ATB Financial. He holds degrees in economics from the University of Alberta and the University of Calgary, and for more than 20 years he’s worked as an economist for many organizations including the Canada West Foundation and the Bank of Canada.
In our webinar, presented by ATB Group Wealth Services, Todd explores the pitfalls and the possibilities of Alberta’s and Canada’s pandemic economy—and challenges us to not just reopen, but to rebuild. He’ll answer the questions:
- What are the drivers of growth for the Alberta economy?
- What are the risks to the growth forecast for the Alberta economy?
- How do we explain simultaneous unemployment and worker shortages?
- What needs to be done to rebuild and transform the Alberta economy?
Alberta’s economy in 2021: what to expect
We don’t talk about living post-COVID. We are living with COVID.
Alberta’s economy is expected to rebound strongly through 2021. Although the forecast has been affected by the fourth wave of COVID-19, we at ATB still expect Alberta GDP to grow 6.0% in 2021. This is a strong rebound but, given that Alberta saw a contraction of 8.2% in 2020, even 6.0% growth doesn’t get our province out of the economic hole that was dug. It may take until halfway through next year to get back to the size of the pre-pandemic economy.
Economic forecast for Alberta’s industries and sectors
Growth is expected to come from technology, agriculture and agri-foods, renewable energy and clean energy tech. Although 2021 has been a tough year for agriculture in the province, 2020 was a good year and the trajectory remains positive overall—most notably in the agri-foods sector.
In the renewable energy sector, Alberta is moving beyond wind and solar to geothermal energy and hydrogen production. In clean energy tech, Alberta is a world leader in many carbon capture, utilization and storage technologies.
The energy sector is stable with good prices for WTI and natural gas, but it’s not expected that much new growth will come out of the sector, since it’s now a backbone for the Alberta economy.
Risks to Alberta’s economic growth
The main risk to the growth forecast is the severity of the Delta wave of COVID-19 and the province responding with further restrictions on businesses. Other risks include geo-political events, risk of a US or global economic slowdown and risk of a drop in oil prices.
Unemployment and labour shortages in Alberta
There’s a paradox in the labour markets in Alberta and across the country. In many sectors, employers are having a hard time filling positions while the province is also experiencing high unemployment levels. Normally these two conditions wouldn’t happen at the same time, but there are some fundamental changes to the workforce contributing to this paradox, including:
- people staying home collecting government benefits instead of going back to work
- people realizing during COVID that they don’t like their job
- people finding new and unconventional ways of making income by offering services online
- a lack of quality daycare
- people taking early retirement during COVID
- a gap between the skills companies need and the skills applicants possess
Rebuilding Alberta’s economy
In 2022, the focus will be on rebuilding the economy. In 2020, the focus was on reopening the economy, but this wasn’t straightforward and many businesses have struggled.
The focus for 2022 and beyond should be rebuilding the economy. Alberta’s economy has been damaged and repair will require transformation. The three broad areas that Alberta needs to get right to rebuild and repair the economy for a sustainable and prosperous future are:
- Education skills and training. Beyond K-12 and post-secondary, this includes early childhood education and education beyond post-secondary. There needs to be more responsibility from both the individual employee and the employer to constantly upgrade skills. We need to see a shift in mentality to lifelong learning and developing (and re-developing) skills throughout our careers.
- Social inclusion and economic equality. Moving toward a more socially and culturally inclusive economy is the right thing to do both morally and economically. Research shows that businesses and companies that are more socially and culturally diverse do better because they’re more creative and innovative.
- An aggressive move to achieve climate change goals and reduce carbon emissions. Alberta should view moving toward climate change goals and reducing carbon emissions as an opportunity to position itself as a global player. This is what the rest of the world wants, including global capital markets that are looking to spend money on projects around carbon reduction and attacking greenhouse gas targets. Alberta has more opportunities here than risks, and needs to embrace this aggressively.
Looking ahead for Alberta’s economic future
Alberta’s economy has come through the pandemic better than might have been expected and has a lot of strengths to build on. At the same time, there are cracks that need to be repaired. By focusing on skills and education, social inclusion and full attention to carbon reduction targets and climate change goals, Alberta will be able to transform its economy to be more sustainable and prosperous in the future.