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Due to falling oil prices, “Alberta appears headed for a mild and short-lived recession, with at least two quarters of negative growth,” says a new report from CIBC. And yes, that would mean trouble for the province’s housing market.
Housing starts are forecast to decrease from 40,600 units in 2014 to 28,000 in 2015 and 34,000 in 2016, the report says. Overall, the bank predicts Alberta’s real GDP will contract by 0.3 per cent in 2015 before recovering to 2.3 per cent growth in 2016.
But the province remains in a good position to weather any storm.
“There are some offsets, as Alberta’s non-energy exporters will be helped by the weaker currency and its domestic spending will be supported by interest rate cuts,” said CIBC chief economist Avery Shenfeld in a release, adding that oil prices are forecast to recover in the medium term.
“Alberta can withstand the economic weakness given its strong fiscal position,” Shenfeld continued.
Indeed, even if Alberta ran a $5-billion deficit year after year and its economy grew at a nominal rate of just one per cent after 2016, it would take five decades for Alberta to reach the same debt to GDP ratio that Ontario planned for last year, the report says.
Elsewhere in Canada
In central Canada, both Ontario and Quebec “could end up with a revenue fillip,” thanks to strengthening US demand and a boost in exports that follows a weakening Canadian dollar, the report says. For example, a one per cent acceleration in US growth typically adds about 1.2 percentage points to Ontario’s real GDP.
Ontario’s economy is forecast to grow from 2.1 per cent in 2014 to 2.8 per cent this year and next, with the jobless rate declining steadily to 6.6 per cent in 2015 and 6.4 per cent in 2016. Quebec real GDP growth is forecast to grow to 2.4 per cent this year and 2.6 per cent in 2016, up from an estimated 1.8 per cent in 2014. The jobless rate is expected to decline from 7.8 per cent last year to 7.2 per cent in 2015 and 6.7 per cent in 2016.
Like Ontario and Quebec, BC’s real GDP is also expected to see modest growth this year and next.