A new economic forecast released by one of Canada’s big banks on Friday projects a severe hit to Alberta’s economy this year as the world grapples with the COVID-19 pandemic.
The TD Economics forecast projects a recession deeper than what Alberta experienced in 2015. The report suggests the province’s economy will shrink by 5.5 per cent this year, and the unemployment rate will rise to 9.5 per cent.
That’s assuming the COVID-19 pandemic disruption is over by the end of May.
Combined with the pandemic, which has seen jobs lost across the country, the price for a barrel of oil dropped below the $10 mark this week.
Western Canadian Select oil, bitumen blended with lighter oils to allow it to flow in a pipeline, fell to a record low of US$4.58 per barrel on Friday morning as New York-traded West Texas Intermediate dropped to US$21.55.
“It doesn’t mean anything good,” said Moshe Lander, who works in the department of economics at Concordia University in Montreal.
“The Alberta economy is going to shrink.”
On Friday morning, Prime Minister Justin Trudeau announced his government will increase its wage subsidy for small and medium-sized businesses from 10 per cent to 75 per cent.
“It’s becoming clear that we need to do more – much more – so we’re bringing that percentage up to 75 per cent for qualifying businesses,” he said. “This means people will continue to be paid even though their employers have to slow down or stop their businesses.
“We’re helping companies keep people on the payroll so that workers are supported and the economy is positioned to recover from this.”
Details of the program are slated to be announced next week, but the goal is to help keep as many Canadians employed as possible.
Lander said the key to the program will be how long businesses are forced to stay closed.
“In the coming weeks, there’s just going to be some businesses that just can’t hang on as long as maybe some others could,” he said.
“The fact is, businesses need to be open to stay in business. It’s as simple as that. So the longer they’re sitting unable to open their doors to deal with customers, to see patients, to innovate and come up with new ideas — the fact is, it doesn’t really matter what the government is covering — it’s going to soften the blow but it won’t completely eliminate it.”
The forecast was released Friday morning ahead of Premier Jason Kenney announcing the closure of all non-essential businesses.
Kenney said that includes close-contact businesses like hair and nail salons, tattoo parlours, furniture and clothing stores, computer and gaming stores.
All dine-in restaurants must also close, Kenney said, adding they can still provide food through delivery and take out.
Non-critical health services must also close, Kenney announced Friday, including dental, physiotherapy and optometry offices.
“Let me be blunt with Albertans,” Kenney said Friday afternoon, “we are facing what will likely be the largest single contraction in our economy in our history.
“These are going to be very challenging days ahead. Governments are acting and we are a resilient and remarkably innovative people.
“I want Albertans to understand with realism what we are about to go through, what many people are already going through. But please remember that we have each other and we will get through this.”
Liquor and cannabis stores in Alberta are exempt from the new rules released Friday.