Rising oil production makes Alberta fastest growing provincial economy in 2017
Ottawa – Alberta is poised to have the strongest economic growth in 2017 mainly due to fast-rising oil production, according to The Conference Board of Canada’s Provincial Outlook: Winter 2017. Former leaders, British Columbia and Ontario, will see the pace of economic growth ease this year, but they will still deliver a solid performance.
“Following two tough years stemming from widespread weakness in the energy sector, Alberta’s economy finds itself with the strongest economic growth this year. Along with a big increase in oil production, some of the growth in Alberta will come from the rebuilding efforts in Fort McMurray. However, we expect more subdued economic growth next year as oil prices are not expected to increase very much,” said Marie-Christine Bernard, Associate Director, Provincial Forecast, The Conference Board of Canada. “Beyond Alberta, all provinces are forecast to see positive economic growth in 2017, with the exception of Newfoundland and Labrador.”
- Alberta’s real GDP is forecast to grow by 2.8 per cent this year, the fastest among the provinces.
- All provinces are expected to see positive economic growth this year, with the exception of Newfoundland and Labrador.
Last year’s leaders, British Columbia and Ontario, will see their economic growth lose some momentum in 2017 but they will still deliver moderate expansion.
Alberta’s real GDP (gross domestic product) is forecast to grow by 2.8 per cent this year, the fastest among the provinces, with 0.4 percentage point coming from the rebuilding efforts in Fort McMurray. Also contributing to the province’s growth is a more stable outlook for the energy sector following the recent OPEC agreement to cut oil production, which will allow oil prices to average almost US$60 a barrel for the West Texas Intermediate by the end of 2018. Although investment in the energy sector will not be increasing at a fast pace, total exports are expected to increase this year due to robust oil production gains as new oil sands projects come online. Another positive development for Alberta down the road is the federal government’s conditional approval of the Enbridge Line 3 Replacement project and Kinder Morgan pipeline.
Ontario’s economy remains in a good position, although real GDP growth is expected to ease to 2.0 per cent in 2017. A few key segments – such as consumer spending, residential investment and exports – will not be performing as strongly and that will temper economic prospects going forward. In particular, total real business investment is projected to pull back 0.7 per cent in the province this year, weighed down by weaker residential investment and machinery and equipment investment.
The Quebec economy exceeded expectations in 2016 and will continue to perform well with real GDP growth forecast to average 1.9 per cent for 2017-18. The province is phasing out health care contributions over the next two years, which will leave households with more disposable income. This, combined with strong job creation, should contribute to decent growth in household spending. Two areas of concern for the province are exports and business investment in machinery and equipment. If they don’t pick up, it could hurt growth prospects going forward.
Taking a hit from the housing market slowdown, British Columbia’s economy will slow from the above 3 per cent average pace of the last three years to 1.9 per cent in 2017. Steps taken by both the provincial and federal governments to cool the housing market have been successful, as sales of detached homes, condos, and townhouses in Greater Vancouver dropped by close to 40 per cent in January 2017 relative to last year. The slowdown in housing activity will spread to other sectors of the province’s economy, with growth in employment and retail sales expected to moderate this year.
Manitoba’s economy will advance 1.9 per cent this year and grow by a similar pace in 2018. Declines in metal mining output of more than 10 per cent are forecast over the next three years and this will lead to more modest growth prospects for the province. Still, Manitoba’s manufacturing, transportation, and insurance sectors are sound, insulating the province from any large fluctuations in GDP.
Following two years of recession, Saskatchewan’s economy will be back in the black this year, with real GDP growth forecast at 0.9 per cent. The oil industry is starting to see activity turn around, but global market conditions continue to challenge potash and uranium producers in the province. A net gain of 1,804 jobs will be created this year, but it will not be enough to prop up disposable income. As a result, household spending will be modest, providing little relief to the struggling retail sector.
PRINCE EDWARD ISLAND
The economic outlook for Prince Edward Island is the best among the Atlantic provinces, with GDP growth of 2.2 per cent expected in 2017. Underpinning the sound economic growth is the province’s manufacturing sector. A competitive Canadian dollar and strong growth from U.S. households have increased demand for the Island’s frozen food and seafood products. Tourism is expected to remain another pillar of growth for the province, contributing to the positive outlook for the food, accommodation, and recreation industries.
The end of development for some big construction projects and an aging population will weigh on Nova Scotia’s economy, with only modest real GDP growth of 0.8 per cent forecast for 2017. Business investment in non-residential structures is forecast to decline as the Maritime Link Transmission Project wraps up, contributing to a 6 per cent decline in construction activity this year. While job creation in the province is expected to improve over the near term, employment growth will be subdued as the aging population constrains labour supply and the potential of the economy. Weak demographics are also expected to dampen housing starts.
New Brunswick’s economy is forecast to perform better; but, real GDP growth will be limited to 1.2 per cent on average this year and next. Despite uncertainty regarding the softwood lumber dispute with the U.S., forestry and logging will benefit from strong demand south of the border and will continue to see positive growth over the next two years. At the same time, metal mining production at the Caribou mine and manufacturing are expected to see gains this year. Similar to Nova Scotia, New Brunswick’s aging population will weigh down labour force and economic prospects going forward.
NEWFOUNDLAND AND LABRADOR
The Newfoundland and Labrador economy will have to contend with the adverse effects of major investment projects unwinding, fiscally restrictive measures that will hamper household spending, and soft commodity prices. The collapse in provincial investment, totalling a 57 per cent decline in 2017 for business non-residential investment, will have ripple effects in labour markets as construction activity declines. The unemployment rate is projected to surge to 15.5 per cent this year. Overall, the Newfoundland and Labrador economy is expected to contract by 1.8 per cent in 2017. However, oil production at the Hebron offshore oil project will ramp up toward the end of the year and is expected to contribute to a temporary spike in economic growth in 2018.
A recorded webinar on the economic outlook for Canada’s cities is available in The Conference Board of Canada e-library.