Alberta’s economy remains sluggish despite an improved oil price backdrop, says a new report by BMO Capital Markets.
The Provincial Monitor says real gross domestic product growth likely slowed to 1.3 per cent this year from 2.3 per cent in 2018, as mandated oil production cuts weighed on output.
“In an effort to ease the supply bottleneck, the province mandated a 325,000 bpd (barrel per day) cut in January, which has already begun to be gradually rolled back. The good news is that WTI (West Texas Intermediate) prices are firm, and the WCS (Western Canada Select) differential has tightened sharply,” says the report.
“Longer term, with oilsands production still on the rise and as past projects/expansions reach completion, limited pipeline capacity will remain a pressing issue. New capital investment in the sector is expected to remain limited.”
BMO predicts the province’s economy will grow by 2.2 per cent in 2020.
In 2017, Alberta’s economy was experiencing 4.4 per cent annual growth.
The BMO report says the housing market is still weak, with prices in Edmonton and Calgary still drifting lower
“Housing starts have found a footing, though well down from pre-shock levels,” it says. “Commercial real estate also remains awash in supply with vacancy rates topping 25 per cent in Calgary’s downtown office segment.
“The labour market is steady, with employment growth up slightly from year-ago levels. The jobless rate, however, is stuck just under the seven per cent level, which is still historically high for Alberta and well above the national average.”
– Mario Toneguzzi