Wednesday, September 18, 2013


Alberta an economic leader despite devastating floods
Real GDP growth forecast to be best in Canada in 2014
By Mario Toneguzzi

CALGARY — Not even the worst floods in memory will be enough to restrain Alberta’s economy this year, according to the latest RBC Economics Provincial Outlook released Tuesday.

The report said post-flood spending will more than compensate for the drop in economic activity related to the natural disaster as RBC is upwardly revising its provincial real GDP growth rate to 3.2 per cent in 2013, up from the 3.0 per cent previously projected due to the anticipated economic boost from post-flood spending.

It will be the second best growth rate in the country this year behind Newfoundland & Labrador at 6.0 per cent.

And RBC is forecasting Alberta growth of 4.1 per cent in 2014 to lead the nation.

“There is no doubt Alberta’s economy took a hit after the floods, however, the province has shown tremendous resiliency, and we expect the economy to spring forward for the remainder of 2013,” said Craig Wright, senior vice-president and chief economist for RBC. “Post-flood spending will more than make up for the short-lived economic challenges Alberta experienced at the beginning of the summer.”

Ben Brunnen, a Calgary economic consultant, said Alberta is well-poised for growth into 2014.

“Oil and gas revenues are at their highest point since 2008, and industry re-investment is comparable to 2011 when we saw five per cent GDP growth,” he said.

“People have confidence in the Calgary economy. Unemployment is low, the residential real estate market is strong, and we are at the front end of a major commercial construction cycle.”

Adam Legge, president and chief executive of the Calgary Chamber of Commerce, is not as optimistic as the RBC report.

“I think Alberta will do moderate growth next year restrained by lack of market access, continued oil price differentials and a shortage of labour. Flood-related spending does hit GDP but should be viewed as a temporary lift that actually will create reduced GDP impacts in the future.”

RBC said that annual GDP statistics will fully capture the additional spending and work required by the reconstruction, repair and replacement that will take place, but will essentially ignore the destruction of or damage to property.

“Even without this perverse lift that the floods will provide to the provincial economy, Alberta continues to demonstrate substantial and sustained economic momentum,” said Wright.

The report is forecasting 1.8 per cent economic growth for Canada this year followed by 2.8 per cent in 2014.

“In addition to the boost from post-flood spending, we expect Alberta’s economy to benefit from stronger capital investment in oilsands now that earlier ‘bitumen bubble’ concerns have largely receded,” said Wright.

Todd Hirsch, chief economist with ATB Financial, said Alberta’s economy is set to pick up a bit of momentum next year after slowing down slightly in 2013.

“Stronger energy prices than a year ago are largely the reason. However, agriculture has quietly but steadily regained a very strong position in Alberta’s economy,” he said.

“Continued inflow of interprovincial migrants in 2014 should also ensure the housing market remains healthy and balanced.”

Photo By: Marc Shandro

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