Sometimes you bend, sometimes you stand, sometimes you turn your back to the wind

—“Life is a Highway,” Tom Cochrane

Our new Quarterly Economic Outlook, “Driving to the conditions: Alberta’s economy in 2026 and 2027” is now available here.

What a difference a few months can make. If we were to look at the economy as a highway (cue Tom Cochrane), we’ve hit a stretch of turbulent weather.

Since our last Outlook, the global landscape has shifted from economic warfare to active military conflict. With the war in Iran and the blocking of the Strait of Hormuz, we are facing a massive global energy shock that is upending global markets.

Uneven Canadian impacts

As a result of this upending, we’ve revised down our forecast for the Canadian economy to 1.3% real GDP growth this year versus 1.6% in our December forecast. The downgrade also reflects some soft Canadian economic data in recent months.

Alberta is expected to weather the storm better than other provinces as the country’s largest oil producer. We now forecast Alberta’s real GDP to grow by 2.7% this year—up from our 2.1% December estimate—putting the province near the top of the growth leaderboard.

The largest component of this upgrade, however, is not related to the sudden surge in oil prices. Rather, it’s due to the fact that the economy has outperformed our expectations in late 2025/early 2026, especially in the labour market, leading us to rethink our more cautious view.

It is, however, important to distinguish between nominal GDP (the current value of economic output) and real GDP (the volume of economic output). While the surge in oil prices is expected to drive a robust 6.0% increase in Alberta’s nominal GDP in 2026 (up from a forecast of only 0.7% in December), boosting government and corporate revenues, this isn't a traditional energy boom. Producers will remain cautious with capital spending due to pipeline constraints and uncertainty about how long this price spike will last.  

Hockey sticks and more diverse growth

Within the energy sector, progress has been made expanding into overseas markets. With new export infrastructure in place, hockey stick growth (an extended period of near zero exports followed by a steep increase) has been observed in Canadian exports to Asia of Canadian propane, oil, and, most recently, liquefied natural gas. Further expansions to energy export infrastructure remains the largest upside to our forecast. Outside energy, the longer term story is a broadening of growth across diverse sectors like petrochemicals, food processing, tourism and aviation.

The rebalancing act of 2026

Alberta’s labour market is rebalancing. After a period where job growth couldn't keep up with record-breaking population gains, the gap is closing. Population growth is expected to moderate to only 1.1% as federal policies reduce the number of non-permanent residents, even as interprovincial migration continues. Meanwhile, we expect annual employment growth of 3.1%, helping pull the average unemployment rate down to 6.4% this year from 7.2% in 2025.

In the housing market, we are also seeing a rebalancing. New supply has come onto the market, as builders catch-up to past record population growth. We expect that housing starts will continue to moderate from last year’s record levels.

The CUSMA junction

While U.S. tariffs and trade uncertainty continue to weigh on investment and are holding back key sectors, the impact has been less severe than originally feared. This is largely because the vast majority of Alberta’s businesses continue to operate under the safety net of the Canada-U.S.-Mexico Agreement (CUSMA) exemption. As we head into the scheduled review of the agreement this summer, our base case assumes a continuation of sector-specific tariffs and CUSMA exemptions on general tariffs.

The dashboard view

The reality on the ground remains complex. While the headline economic numbers show Alberta outperforming other provinces, households are still being squeezed by higher food and energy costs. 

Back to the wind

Despite the geopolitical turmoil, there is upside if Canada executes on promises to fast-track major projects and expand non-U.S. exports.   

In the words of Tom Cochrane, will Canada turn its back to the wind in 2026?

Read the full Quarterly Outlook here.  

Answer to the previous trivia question: Saskatchewan joined Confederation along with Alberta in 1905.

Today’s trivia question: The trade deal between Canada and China that went into effect on March 1, 2026 reduced the tariff on canola seed to ___%?