Photo: Bill Longstaff/Flickr
After recording the fastest economic growth in the country last year, Alberta’s economy is slated to expand at a more moderate pace in 2018, with the help of stable residential building permits.
In 2017, Alberta’s real GDP growth was 4.9 per cent, but this year growth is slated to ease to 2.7 per cent before dropping further to 2.3 per cent in 2019, according to a report by ATB Financial, published Tuesday.
“Alberta’s economy is once again expanding and is gradually improving after a downturn which saw the province’s output shrink by nearly eight per cent. Still, ongoing unemployment and lower pay continue to trouble thousands of Albertans,” reads the report.
Although economic growth is expanding at a slower pace this year, primarily due to an imbalanced energy sector, ATB Financial says most economic indicators are moving in the right direction.
In 2018, real GDP growth will be led by non-energy sectors, with an increase in net interprovincial migration and a rise in employment growth.
As for Alberta’s housing market, stable residential building permits will help in maintaining the province’s moderate growth this year.
In March, residential permits totalled $850 million, unchanged from the level recorded in February. ATB Financial notes that over the last 12 months, residential building permits increased 7.3 per cent compared to the same period a year ago.
The annual gain in building permits is reflected in Alberta’s actual housing starts, which hit 29,695 in April, up 12 per cent from a year ago.
According to ATB Financial, it’s unlikely that housing starts will reach pre-recession levels in the near-term because of an increase in new home sales and a drop in home resales across the province.
“In fact, in March of 2018, the number of homes without a contract to buy or sell touched near record highs (689) in Calgary. More new houses are sitting vacant in Alberta’s major cities and show signs of an overbuild,” reads the report.
The organization adds that stricter mortgage rules introduced on January 1, by the Office of the Superintendent of Financial Institutions (OSFI), and rising interest rates will continue to impact housing demand.
Going forward, Alberta’s economic growth this year could be threatened by pipeline projects weighing on energy investment.
“Risks with respect to oil prices remain including the ongoing opposition to pipeline expansion,” says Todd Hirsch, ATB Financial’s chief economist, in a statement.
“If there is no resolution — or worse, a negative outcome on pipeline projects — the short- and medium-term outlook for the sector will dim,” he adds.