‘We all know it’ll be a difficult 12 months. However total, the enterprise group in Alberta could be very constructive.
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Is Alberta’s vacation punch bowl half full, or half empty, for 2023?
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It is all about perspective.
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The encouraging information for Albertans heading into a brand new 12 months is that the province is anticipated to guide Canada in financial development. Jobs will proceed to be created at the same time as recessionary winds whip throughout the nation.
The weaker view is financial development and employment good points will gradual considerably after rising in 2022.
The unemployment fee is forecast to extend barely, whereas stubbornly excessive inflation, rising rates of interest and an anticipated world slowdown are hitting the market.
A brand new TD Economics report tasks Alberta’s economic system will develop 1.9 per cent in 2023, a major cooling from the 5.1 per cent development this 12 months that was pushed by rising commodity costs.
Nonetheless, even a modest financial growth ought to earn Alberta the mantle of prime performer within the nation, barely forward of second-place Saskatchewan, whereas the broader Canadian economic system is anticipated to teeter on the point of recession.
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“It is virtually an oil story,” TD economist Rishi Sondhi mentioned of Alberta’s forecast, noting that power costs are anticipated to stay excessive in 2023.
“You must do not forget that the oil and fuel sector, when buzzing collectively, has some helpful unwanted side effects for different industries. . . A rising tide lifts all boats.”
Costs for benchmark US oil climbed above US$100 a barrel this 12 months after Russia’s invasion of Ukraine, earlier than settling round $75 for many of December.
TD expects West Texas Intermediate (WTI) crude to common round $88 a barrel subsequent 12 months, whereas North American pure fuel costs will stay excessive at $5.80 per million British thermal models.
Expectations of continued energy within the oil patch are driving optimism amongst enterprise homeowners, mentioned Alberta Chamber of Commerce CEO Shauna Feth.
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Oil manufacturing continues to develop and spending is anticipated to rise. The $21.4 billion Trans Mountain pipeline growth undertaking is anticipated to be accomplished later in 2023.
A latest chamber survey of enterprise operators discovered that barely greater than two-thirds say they’re constructive about Alberta’s long-term future, up from 43 per cent a 12 months in the past.
And almost half — 46 p.c — anticipate to extend their workforce over the subsequent 12 months. Solely 4 p.c imagine it would shrink.
Nonetheless, the ballot additionally discovered that greater than three-quarters anticipate a recession in 2023.
“We all know it’ll be a difficult 12 months,” Feth mentioned. “However total, the enterprise group in Alberta could be very constructive.”
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One other level to contemplate is what’s going on across the Canadian panorama.
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TD predicts that the nation’s gross home product (GDP) will develop by a tepid 0.7 p.c in 2023.
“Whereas the nation is heading into some fairly vital headwinds when it comes to the economic system, the Alberta economic system seems to be rather more resilient and will proceed to develop,” Finance Minister Travis Toews mentioned in an interview .
“Employers throughout the province are searching for assist. There are unbelievable alternatives in Alberta proper now for those who’re searching for a job.”
A rise in Alberta’s GDP subsequent 12 months is welcome, however the labor market outlook within the province just isn’t fairly so sure.
TD Economics mentioned employment, which is anticipated to develop by 5 p.c this 12 months, will gradual and climb by lower than one p.c in 2023.
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And the unemployment fee, which stood at 4.8 p.c in the summertime and jumped to five.8 p.c in November, will common 6.1 p.c in 2023.
Shopper spending can also be anticipated to weaken.
Housing begins within the province, up 19 p.c by way of the primary 11 months of 2022, will cool subsequent 12 months, and are anticipated to drop seven p.c, in line with TD.
House costs in Alberta, lately hit by rising mortgage prices, are anticipated to drop 5.6 per cent subsequent 12 months, about half the nationwide drop predicted by the research.
Different housing markets had been hit by a correction — after seeing bigger good points lately — however Alberta skilled much less of a whipsaw.
“We’re not anticipated to see the identical degree of pullback” as in different markets, mentioned Ann-Marie Lurie, chief economist on the Calgary Actual Property Board.
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“We nonetheless have a whole lot of vacant positions on this province and all of it will assist to dampen a number of the impacts that increased (rates of interest) could have.”
In Calgary, the benchmark house worth hit a brand new excessive of $546,000 in Could, earlier than falling within the second half of the 12 months, with a mean of $520,200 final month.
In the meantime, the province’s inhabitants continues to extend, which ought to help the housing market.
Between July and the tip of September, the province noticed the quickest three-month development fee of interprovincial migration for the reason that identical interval in 1980. Extra individuals moved to Alberta from Ontario, British Columbia and Manitoba.
“Canadians are voting with their ft,” Toews mentioned.
The TD forecast additionally factors to vital provincial inflation reduction for households to return, as this 12 months’s price range surplus is anticipated to exceed $12 billion.
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The province has a whole lot of capability for added spending or to extend its financial savings. Premier Danielle Smith just isn’t indicating that broad-based tax cuts can be included within the 2023 provincial price range.
In a year-end interview, she mentioned paying off long-term debt stays a precedence.
“We won’t proceed to have this excessive degree of debt in a rising rate of interest atmosphere, however there are some vital price pressures, not solely on the infrastructure aspect, but in addition on the affordability aspect,” Smith added.
“I might be very stunned if the finance minister proposed a major tax minimize. There can be focused measures.”
Chris Varcoe is a Calgary Herald columnist.
cvarcoe@postmedia.com
