Three new economic forecasts issued Friday point to another difficult year for Alberta, including a return to recession and thousands of job losses.
A new outlook from RBC Economics says all provinces will feel the pain of COVID-19 but economies on the Prairies will be hit by a double whammy that includes plunging oil prices.
“Sharply lower commodity prices weigh heavily on our forecasts for the Prairies derailing expectations for [a] stronger year for these economies,” says the report.
RBC says Alberta, as well as Saskatchewan, are now expected to slip back into recession in 2020 as crude prices have fallen to their lowest level since 2016 and are “expected to stay low.”
For Alberta, the bank says, this “shelves any prospect” that it will recover the economic output lost during the last downturn that hit the province five years ago.
It forecasts Alberta’s GDP will decline by 2.5 per cent in 2020, down from narrow gain of 0.3 per cent last year.
RBC also revised its forecast for oil prices. It had anticipated the North American benchmark price for crude, West Texas Intermediate, would average $58 US per barrel. The bank now forecasts an average of $42 US per barrel.
The provincial government also planed for $58 US oil when it issued its provincial budget last month.
Oil companies are also trying to assess where oil prices are headed, but the situation has already prompted some producers to announce deep spending cuts in 2020.
On Friday, ARC Resources said it will chop its 2020 spending budget from $500 million to no more than $300 million and cut its monthly dividend to two cents from five cents.
Premier Jason Kenney has said he believes the sector will also be making layoff announcements in the coming weeks.
Charles St-Arnaud, chief economist at Alberta Central, the central banking facility for Alberta’s credit unions, also thinks it’s likely that the province will skid into recession.
“In Alberta, we expect that the sharp drop in oil prices and the impact of the coronavirus will result in the economy contracting by 1.5 per cent in 2020 and to the loss of about 25,000 jobs in 2020,” St-Arnaud said in a commentary Friday.
St-Arnaud said the length and depth of the downturn will depend on whether oil prices continue to fall lower and how long oil prices remain depressed.
But he thinks the conflict between Russia and Saudi Arabia over prices will drag on and keep oil prices around current levels beyond the next six months.
ATB Financial said in a research note Friday that “there is no doubt jobs are on the line.”
Though many Albertans had hoped this would be a year of recovery for the province, the unemployment rate in February was already high in February at 7.2 per cent.
“Alberta’s unemployment rate will almost certainly rise over the short term,” ATB said.
It says hiring in the oilpatch will be on hold due to the price war and “at least some layoffs are a likely scenario.”
The number of jobs in the province was down 0.1 per cent in February compared to a year ago. Oil and gas jobs were down 10.7 per cent over the same period, according to ATB.
The note says oil and gas won’t be the only industry affected, adding sectors that rely on tourists or large gatherings will also impacted by the pandemic. Those include wholesale and retail trade, accommodation and food services and information, culture and recreation sectors.
“These three sectors are likely to be hit quite hard by COVID-19 disruptions,” ATB said.
“Even if the job losses are temporary, they will be painful.”