CALGARY, ALBERTA–(Marketwired – Oct. 6, 2016) – With the heaviest direct reliance on the energy sector, accounting for roughly 26 per cent of the province’s GDP, Alberta’s economy continues to grapple with recession in 2016, according to the BMO Blue Book, released today. Challenges from oil and gas, made worse by the effects of May’s wildfire, have left the province in the back of the provincial pack but by next year should return Alberta’s economy to subdued growth levels.
Much like the U.S. Federal Reserve’s Beige Book, the BMO Blue Book combines the expertise of BMO’s economists with information on current national and provincial business conditions provided to BMO’s commercial bankers by local businesspeople.
According to Robert Kavcic, Senior Economist, BMO Capital Markets, BMO’s forecast for 2017 presumes a gradual upward grind for oil prices, but will still be a stark change from the rampant outperformance of years past. “Looking a few years down the road, the current investment downturn will likely lead to a flatter production profile and, barring a significant supply shock, we don’t believe oil prices will return to levels that will spur another investment boom,” said Mr. Kavcic.
The housing market has felt the ripple effect of the province’s challenges, with benchmark prices in Calgary down five per cent from peak levels and a surge in commercial vacancy rates reaching 20 per cent and creating a glut of supply amidst weaker demand prospects.
The labour market has weakened considerably as a result of oil & gas issues, topping the national average for the first time in almost three decades at eight per cent. However, this is being cushioned by a burst in public sector hiring, albeit not quite enough to counteract interprovincial migration. Once among the most appealing locations for prospective workers in 2013, the province is now seeing outflows as a result of relative economic improvements in other areas of the country.
Susan Brown, Senior Vice President, Alberta & NWT Division for BMO, points to historical resilience within the province’s business climate. “While there’s no doubt the loss of professional expertise in the energy sector we’re experiencing will be felt for some time, Alberta has weathered similar situations and emerged strong,” said Ms. Brown. “Our commercial customers are familiar with coping with challenging market conditions, and we are currently seeing them support each other and restructure to overcome the circumstances.”
Ms. Brown added that rebuilding of Fort McMurray will continue well into 2017, and BMO is here to help with a highly-skilled team of experts who can make lending decisions at the local level to help the bank’s commercial clients boost productivity, expand into new markets and make strategic investment decisions that will help propel growth and drive success.
The full BMO Blue Book can be downloaded at: www.bmocm.com/economics.
About BMO Financial Group
Established in 1817, BMO Financial Group is a highly diversified financial services provider based in North America. With total assets of $692 billion as of July 31, 2016, and over 45,000 employees, BMO provides a broad range of retail banking, wealth management and investment banking products and services to more than 12 million customers and conducts business through three operating groups: Personal and Commercial Banking, Wealth Management and BMO Capital Markets.
Michelle Agnelo, Toronto
michelle.agnelo@bmo.com
(416) 867-3996
Matthew Duffin, Toronto
matthew.duffin@bmo.com
(416) 867-3996
Internet: www.bmo.com
Twitter: @BMOmedia