Edmonton — In 2023, the primary economic concern revolved around the rising borrowing costs aimed at reducing inflation. As we shift our focus to the upcoming year, a new theme emerges: 'the wait’. ATB’s latest forecast suggests that the Bank of Canada will continue its 'pause, wait and see' stance before lowering its policy rate.
"As Tom Petty famously sang, 'the waiting is the hardest part.' This sentiment resonates as the delayed effects of increased borrowing costs are set to impact more Albertans in the coming year,” said ATB Financial's Chief Economist, Mark Parsons." Based on current trends, we forecast that the Bank of Canada will initiate cuts around the middle of next year."
ATB expects the Alberta economy to slow to 2.1% real GDP growth in 2024 and pick up again to 2.7% in 2025.
With the final month of 2023 upon us, ATB’s latest economic forecast outlines the current factors influencing the Alberta economy. Given heightened uncertainty, this edition of the outlook incorporates high and low scenarios.
Energy sector revitalised
Although oil and gas investment remains well below its historical peaks, there is an upward trend. The energy sector has exhibited a resurgence post pandemic, and this positive momentum is expected to persist into the coming year as market access improves and prices remain healthy.
Population growth surges
Alberta experienced a population surge of 4.1% from July 2022 to July 2023, marking the fastest growth rate among all provinces and the highest rate of increase since 1981. This growth is multifaceted, driven by factors such as immigration, non-permanent residents, interprovincial migration, and natural increases. While population growth will moderate, it will remain strong. This sustained growth is anticipated to bolster consumer spending, stimulate housing demand, and contribute to an expanded labour supply.
There are more signs of diversification within the broader energy sector including biofuels, petrochemicals and hydrogen. Alberta is a key player in clean and low-emitting energy due to its abundant low-cost feedstock, existing talent pools and infrastructure, and location advantages. In addition, other sectors such as food manufacturing, aviation and technology are seeing significant growth.
Speed bump ahead
Despite being in the faster economic lane, Alberta's economic growth has been challenged by the speed bump created by higher interest rates. Other disruptions include the wildfires in May and June, the strikes at the B.C. ports in July and drier-than-normal conditions experienced by farmers in the southern and central eastern regions.
“In 2024, Alberta is expected to remain a growth leader in Canada despite the challenges of higher financing costs and loan resets. While households and businesses will feel the impacts, Alberta enters the year in relatively good shape”, added Parsons.
About ATB Financial
With $60.2 billion in assets, ATB Financial is a leading financial institution that started in Alberta with the focus of putting people first. Our success comes from our more than 5,000 team members who love to deliver exceptional experiences to over 800,000 clients across our Personal and Business Banking, ATB Wealth Management and ATB Capital Markets businesses. ATB provides expert advice, services and products through our many branches and agencies, our 24-hour Client Care Centre, four entrepreneur centres and our digital banking options. ATB powers possibilities for our clients, communities and beyond.
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ATB Financial’s Economic Outlook is intended for general information and educational purposes only and should not be considered specific legal, financial, tax or other professional advice or recommendations. Information presented is believed to be reliable and up-to-date but it is not guaranteed to be accurate or a complete analysis of the subjects discussed. All expressions of opinion reflect the judgement of the authors as of the date of publication and are subject to change. The actual outcome may be materially different. ATB Financial and any of its affiliates are not liable for any errors or omissions in the information, analysis or views contained in this report, or for any loss or damage suffered. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by ATB Financial or any of its affiliates and related entities.