Calgary—Despite the ongoing challenges presented by elevated inflation and interest rates, Alberta's economy is forecast to continue to grow in 2023 and 2024 while some other parts of Canada may experience recessions or near-recessions. The boost Alberta is getting from its energy and agriculture sectors will help propel it to the top of the provincial growth leaderboard. With that said, many households and businesses will be stretched thin by higher prices and borrowing costs.

ATB Financial’s updated forecast is for Alberta's real GDP to grow by 2.6 per cent in 2023 followed by 2.3 per cent in 2024.

“Central banks around the world, including the Bank of Canada, have raised interest rates to levels not seen since 2007 in an effort to slow the economy and, in turn, slay the inflation monster that reared its head last year," said Rob Roach, Deputy Chief Economist at ATB Financial. "The challenge is that higher borrowing costs take time to have their full effect on the economy. We will have to wait until deeper into the year before we know if they will tame inflation and how much economic damage they will do along the way."

ATB’s latest economic forecast outlines five key factors that continue to influence the direction of Alberta’s economy:

Oil

Alberta is producing more crude oil than ever, oil prices are forecast to remain strong compared to the five-year average set prior to the pandemic, and the planned completion of the Trans Mountain Expansion Project later in the year will add much-needed egress capacity for Alberta crude. As a result, oil and gas capital investment has bounced back from recent lows.

Jobs

Higher interest rates are expected to weigh on employment growth. Nevertheless, we may not see the spike in unemployment that typically accompanies periods of elevated interest rates due to ongoing labour shortages.

Population growth

During the third quarter of 2022, net interprovincial migration into Alberta reached its highest level since 1980. Ongoing population growth will support a range of sectors including housing and retail while also helping to ease labour shortages.

Agriculture

Offset by higher operating costs, Alberta’s agriculture sector benefited from better growing conditions and record-setting prices last year and should continue to be a solid contributor to the province’s economic performance in 2023.

Housing

Housing starts are expected to slow in Alberta after a strong performance in 2022. Even so, the forecast is 13.5 per cent higher than the five-year average set prior to the pandemic.

"It’s going to be an anxious year as we wait to see if the traditional approach to dealing with inflation works this time around," adds Roach. “With luck, the downturn will be mild and short and maybe, just maybe, we can get out of this without a surge in unemployment.”