Okotoks is well positioned to take advantage of new economic opportunities as Alberta’s economy shows signs of turning around after a punishing recession, said a top provincial economist.
Todd Hirsch, chief economist at ATB Financial, said he expects Alberta’s oil and gas sector will be stable this year, but without much growth this year. However, he sees opportunities for growth in the tourism and agrifood sectors.
Okotoks is in an ideal location to take advantage, said Hirsch.
“I know Okotoks is kind of in the centre of a lot of that activity,” he said.
Hirsch spoke about rebuilding Alberta’s economy during a March 29 lunch meeting hosted by the Okotoks Chamber of Commerce.
He said 2017 will be a rebuilding year for Alberta’s economy, but employment will continue to struggle.
“After two years of nasty recession, in 2017 we do expect some modest rebound for Alberta’s economy and that will come as a big relief for a lot of people,” said Hirsch. “It’s been a tough recession.”
The first half of 2017 will still be a challenge time for Alberta’s economy, said Hirsch, but he is predicting the province’s GDP to grow by 2.2 per cent. It is an upward trend. That is half the growth rate the province saw between 2010 to 2014.
“It’s still going to feel a bit modest, especially the first half of the year,” he said.
Oil prices are expected to fall within the $50 to $60 per barrel range and Hirsch said the energy sector will remain the stable backbone of the economy, but it won’t be the engine of growth it has been in the past.
Alberta’s economy was looking rosy before the recession three years ago.
“We were the engine of Canada’s economy, we had the lowest unemployment rate, the highest average weekly earnings and there was no end in sight,” said Hirsch.
Everything changed when oil prices began to slide in June 2014.
According to Hirsch, Alberta’s largest employment sectors at the time were oil and gas, construction and professional, scientific and technical sectors.
By 2017, total employment in the oil and gas industry was down 23 per cent, he said. Though weekly earnings are up, Hirsch said it’s at the expense of jobs. As well, employment in construction is down 12 per cent and manufacturing is down by 11 per cent, he said.
Meanwhile, he said total wages in Alberta are down 5.8 per cent.
“Over the recession, disproportionately the jobs that were lost are the highest paying jobs,” said Hirsch.
Hirsch is hopeful oil prices will remain in the $50 to $60 per barrel range for the next year. However, he stressed it’s hard to predict precisely where oil prices are going.
The province’s construction sector will also start to recover, but Hirsch doesn’t expect it to reach the heights seen three years ago. He said building permits across the province are down by 26 per cent from two years ago.
It’s a significant decline, but Hirsch noted it’s a drop from record levels. When compared to the 10-year average, he said current building permits are only down four per cent.
Hirsch said several non-energy sectors, particularly tourism and agriculture, are looking up.
Alberta’s tourism sector is on track for a third record year in a row, thanks to an improving U.S. economy and a weak Loonie keeping more Canadians at home, said Hirsch.
He’s also optimistic about Alberta’s agri-food business sector. Hirsch said agrifood businesses will become the largest part of Alberta’s manufacturing sector, largely on the strength of small and medium sized businesses.
“It’s good news because it does help diversify Alberta’s economy,” he said.
Hirsch said the Province needs to take steps to balance Alberta’s budget and deal with its large, ongoing deficits.
“It’s déjŕ vu, we’ve been here before and it’s a tough hole to climb out of,” he said. “We did it in the early ‘90s, but we’re moving in a direction again now where if the economy doesn’t really pick up and start to grow strongly again, we’re going to end up with a structural deficit that one way or another we’re going to have to eliminate.”
According to Hirsch, the provincial government has few options. It can cut spending significantly, hike taxes, or borrow and put the question off for the future. “It’s going to be a tough choice, I don’t for a minute suggest that it’s easy to solve this problem,” he said.
Looking forward, he said 2017 is the year for the provincial government and Alberta’s businesses to look beyond the oil and gas sector for new opportunities.
“So, what is the lesson for Alberta in 2017?” he said. “It’s a year a lot of individuals, maybe businesses, maybe towns and cities and communities are going to have to step back and look at our economy from a different perspective.”