CALGARY, AB, Nov. 25, 2021 /CNW/ – ATB Financial’s latest Economic Outlook forecast for 2022 anticipates that, while a strong recovery in the oil and gas sector and momentum in other areas are propelling the Alberta economy forward, we will continue to face challenges due to the ongoing pandemic.
Alberta’s real GDP is expected to rebound by 6.3% in 2021 followed by growth of 4.0% in 2022 and 2.5% in 2023. While we are moving in the right direction, the annual provincial output will only meet 2019’s output level by 2022 and the annual GDP per capita will take until 2023 to reach the pre-pandemic level.
“Alberta lost the most economic ground of any province in 2020,” said Todd Hirsch, vice president and chief economist at ATB Financial. “Although Alberta will likely post the highest rate of growth among the provinces in 2021, most of the other provinces will reach, and start growing beyond their pre-pandemic level of output sooner than Alberta.”
As we enter into 2022, three crucial questions continue to be top of mind with regards to the state of Alberta’s economy:
When are things going back to normal?
Despite efforts to manage the pandemic with masks and vaccines, we are not quite there yet. These steps have helped in keeping the economy “open” much of the time. However, Alberta’s recovery has been uneven with sectors such as financial services, cannabis and retail performing better than before the pandemic while other areas like restaurants and bars, tourism and the arts, have shown a decline in output. The labour market has improved over the course of 2021. However, the unemployment rate is sitting at 7.6% as of October 2021 and expected to remain elevated, averaging 7.9% in 2022 before easing to 6.8% in 2023.
Where’s the boom that normally accompanies high oil and natural gas prices?
With the current high oil and natural gas prices, historically a boom in the economy would be expected. However, it is unlikely this time due to a number of factors including: repairing balance sheet damage sustained in 2020, pipeline transportation constraints, regulations to reduce carbon emissions, and shifting public attitudes around climate change. As a result, we are anticipating only a modest rise in oil and gas capital expenditures in 2022 and 2023.
How high will and for how long will inflation remain high?
The pandemic has created unusually high levels of uncertainty and the forecast assumes higher-than-normal inflation and rising interest rates to prevent further price escalation. Alberta’s inflation rate has been above 4% since August with rates expected to stay around this level for the next few months and then falling to an average of 3% in 2022 and 2.5% in 2023.
The Alberta economy continues to improve. High oil and gas prices are providing a positive boost but are unlikely to create an economic boom and like other regions in Canada, we are facing the challenges of the ongoing pandemic, supply chain disruptions and inflation. A growing tech sector, new investment in petrochemical production capacity, a resilient housing sector and the potential development of clean energy options such as hydrogen all bode well for future growth in Alberta.
Read the complete ATB Financial Economic Outlook here.