This year may end up being a very difficult year for Albertans, as a new report projects a recession will hit the province.
The Conference Board of Canada’s 2019 outlook found that troubles in the oil industry and the debt burden in Ontario will push down the overall economy of Canada.
“While the outlook is generally sound for most provinces, there are challenges and risks. A slump in oil sector investment and fiscal austerity in Ontario are expected to be part of the economic landscape for some time to come while elevated household debt levels and moderate household income growth are weighing on consumer spending across the country,” said Marie-Christine Bernard, Director of Provincial Forecast.
The economic situation is particularly bleak for Alberta as the report highlights its economy will shrink by 0.1 percent, compared to a projected 1.3 percent growth in the last forecast.
The report recognized that the decline in the Albertan economy is directly related to the regulatory environment driving away energy investment.
“Investment in the province’s oil sector will be low as concerns about Canada’s carbon tax and a lack of pipeline capacity will likely drive many investors south to the United States,” it reads.
The Canadian pipeline association has lamented this combination of restraints on their industry creating a “competitiveness crisis” because Canada and the United States, seeing investors flee Alberta in droves.
As the federal government has failed to make any meaningful progress on approving pipelines, despite purchasing an incomplete pipeline project for $4.5 billion, companies have had to cut production, further reducing potential income for Alberta.
In 2018 alone Canadian companies lost over $20 billion in revenue due to insufficient pipeline capacity.
Alberta’s troubles will push down the entire Canadian economy in 2019, the report reads, as the Conference Board predicts Canada’s GDP growth to slip to just 1.4 per cent.
The report does predict a rebound in the Alberta economy as early as 2020 if production and pipeline capacity can be increased.
If Alberta’s declining energy production trend is reversed the Conference Board predicts Alberta’s economy would become the strongest in Canada.
Newly elected Premier, Jason Kenney, has reiterated his support for the energy sector and his desire to get pipelines built. He has already improved Alberta’s economic outlook by scrapping the carbon tax.
If the energy sector does not see the regulatory environment improve this year, the economic outlook for Canada will become much less certain.