Alberta recession or growth? Economists divided on impact of oil prices

Some prominent economists say they do not agree with the Conference Board of Canada's prediction that Alberta will slip into a recession this year.

• Jim Prentice slams Conference Board report on possible Alberta recession
• Oil rout resumes, dragging Canadian dollar under 84 cents and TSX down 120

Todd Hirsch, the chief economist with ATB Financial, told small business owners in downtown Calgary that he expects a soft year nota recession.

Economist on possible Alberta recession

10 years ago

Duration 1:18

ATB Financial economist Todd Hirsch reacts to Conference Board of Canada's projection that Alberta could enter a recession in 2015.

He expectsthe economy will still grow by two per cent.

The Conference Board of Canada expects a contraction in 2015 becausethe plunging price of oil is impacting all areas of the economy from corporate investment and hiring to consumer spending.

"The province is certain to suffer, especially on the employment front, from the drop in oil prices and it is likely to slip into recession," said a report by Conference Board of Canada economist Daniel Fields.

During Alberta's last recession, roughly 30,000jobs were lost and housing starts fell by 75 per cent. Alberta could take a similar hit if oilprices do not recover soon, according to the Conference Board.

Slowdown still expected

But Hirsch still expects a bumpy ride for many Albertansin 2015.

"It will be a challenging year for new grads and the job market," he said.

Otherwise, he expects interest rates to remain low and Canadian dollar could fall in value further this year.

• Cheap oil could be good for Canada, Royal Bank says

"With the dollar trading at 83 cents to the U.S. dollarthat is probably good news for the Canadian economy right now," said Hirsch.

Economist Pierre Cleroux with the Business Development Bank of Canada echoed similar remarks at the Calgary Chamber of Commerce event.

"I don't believe there will be a recession, there will be a slowdown," he said.

He suggests the global economy is growing and that is good news for Alberta and its exporting industries.

Prentice rejects recession

Alberta Premier Jim Prentice says low oil prices will translate into a $7billion loss in royalty revenue.

Prentice said he is confident the government will get through the drop in crude prices.

He suggested having discipline in spending will help weather the storm.

"We are living beyond our means and in a sense we are living on resource revenue that properly belongs to our children and our grandchildren," he said.

Prentice said Albertansare tired of the roller-coaster of revenue from the energy sector,and a special committee is expected to look at the issue.

Energy cuts

In the last year, several large oil and gas companies have announced spending cuts.

Total S.A.postponed itsJoslynoilsandsproject, whileStatoilput halted itsKaiKosDehsehproject.

Husky, Penn Westand Canadian Natural Resourcesslashed billions of dollars in spending.

Some companies have announced job cuts including Shell andNexen.

Suncor Energy announced Tuesday it will cut approximately 1,000 jobs and reduce its 2015 spending plans in response to lower oil prices.

Real estate softening?

Real estate experts are noticing the market softening in the province.

Don Campbell is a senior analyst with the Real Estate Investment Network, whichanalyzes the economy and its impact on real estate in the country. Heis also a real estate investor and the majority of the 128 properties he owns are in Alberta.

"The clock is ticking," said Campbell.

"We have hit the magic six month mark of oil price decline and historically that is when oil prices start to be reflected into the confidence of the real estate market. So we are starting to see listings jump substantially here in January and that will then reflect into the market prices in February and March."

As the real estate market softens, Campbell said the homebuilding industry will also slow down as well.