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indicatorRetirement

4 key issues affecting the Alberta economy in 2018

By Robert Roach, Director of Insight, Economics and Research, ATB Financial 28 November 2019 2 min read

In 2017, Alberta’s economy climbed out of the recession in a big way. The province’s real GDP growth of 4 per cent led the country and gains were experienced in nearly every major sector. This trend is anticipated to continue in 2018, but as we move deeper into the year there are many economic factors that will form either a headwind or tailwind for Alberta’s economic growth, including oil prices, the U.S. economy, and the performance of sectors such as agriculture, manufacturing and tourism.

With that said, these four issues stand out as particularly important stories to watch in the months ahead.

 

1. Free Trade

Free trade with Europe and other North American countries affects the Albertan economy.


Alberta performs well in a free trade environment, so it was welcome news when the Canada-European Union Comprehensive Economic and Trade Agreement came into effect on September 21, 2017. However, this victory for freer trade has been overshadowed by the uncertain fate of NAFTA, the imposition of tariffs on Canadian lumber by the U.S. and the failure of the federal government to close a deal on the Trans-Pacific Partnership. If the current NAFTA deal is “torn up,” the negative economic effects could be severe. 

 

2. Pipeline Capacity

Pipeline capacity affect Alberta's oil exports and pricing.


More than 95 per cent of Canada’s oil exports end up in the U.S. While oil from Alberta is still in demand south of the border, growth is limited by flattening U.S. oil consumption. A larger list of customers would help Alberta get a better price for its oil, but there have been mixed results on getting the pipes in the ground that will ensure the efficient delivery of our most important product to multiple markets.

There has been some progress toward increasing pipeline capacity to the U.S. with the construction of the Keystone XL pipeline lurching toward reality. The idea of sending more Alberta oil to eastern Canadian refineries was mothballed when TransCanada withdrew its Energy East proposal. The federal government approved the twinning of Kinder Morgan’s Trans Mountain pipeline between Edmonton and Burnaby in late 2016, but the project continues to face severe opposition.

 

3. Unemployment

Unemployment has dropped recently, but hasn't yet reached pre-recession levels. 


The recession caused unemployment in Alberta to rise in 2015 and 2016. The unemployment rate peaked in November 2016 at 9.0 per cent and while it has dropped recently, it has not returned to pre-recession levels and still remains above the Canadian average. The unemployment rate will likely stay unusually high for the next two years, slowing a return to pre-recession economic levels.

 

4. Household Debt

House debt in Alberta is rising.


Not all household debt is bad, but the fact that it has been rising in Alberta (which already has the highest average level of non-mortgage household debt in the country) is a cause for concern. With the unemployment rate expected to stay stubbornly high in Alberta and a good chance that the Bank of Canada will raise interest rates more than once in 2018, the ability of many Albertans to stay ahead of their debt will be tested.

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