Alberta and Calgary are still likely a year away from returning to pre-pandemic economic conditions, and it could take another year or more to make up for lost growth, according to the annual outlook from Calgary Economic Development.
ATB chief economist Todd Hirsch said the province is expected to see 6.3 per cent growth in 2021 and another 4.3 per cent in 2022.
The province saw an 8.2 per cent contraction in 2020.
“We expect the Alberta economy to get back to pre-COVID levels probably by mid-2022,” Hirsch told reporters on Wednesday, “so we still have a ways to go.”
The pandemic is an ever-present unpredictable force for economic activity, he said.
Hirsch agreed with the Bank of Canada’s forecast of elevated inflation through the first half of 2022 and said the sped-up BoC timeline for increasing interest rates is a signal Albertans should heed.
Hirsch didn’t expect Alberta’s unemployment to return to “normal” from its current rate of 8.1 per cent until Q3 of 2022 or later, continuing Alberta’s lagging economic rebound.
“We are lagging, but that’s because the deficit or the contraction that we saw in 2020 was the deepest in the country, and that was compounded by the troubles in the energy sector and the drop in oil prices,” Hirsch said.
On Wednesday, West Texas Intermediate was above $82 a barrel and Western Canadian Select is flirting with $70. Some forecasts are calling for triple-digit prices.
“While oil prices are really good right now, and that is certainly helping those energy producers (with) repairing some balance sheets and maybe some merger and acquisition activity, we’re still not seeing a lot of reinvestment in Alberta’s traditional hydrocarbon industry,” the ATB economist said.
He repeated his call for oil and gas to remain the “backbone” of the economy and highlighted sectors seeing growth, which is likely to continue through 2022.
“The technology and digital sector, agriculture and agrifoods, renewable energy and clean energy technology, the film and TV industry, life sciences, health sciences — all of these have been doing very, very well,” he said.
“Now we have to put it in context: all of those sectors combined are still dwarfed by our traditional oil and gas sector, so we do still have some ways to go. We need a lot of growth out of those sectors to kind of move the needle.”
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Hirsch stressed a trio of areas the city and province “has to get right” to rebuild the economy: education and skills, addressing economic inequality with social inclusion, and commitments to carbon reduction and climate change goals.
Recovery under a new mayor
In her first address to Calgary’s business community as mayor, Jyoti Gondek shared her economic priorities.
“Faced with so many challenges, we must draw upon our unique strengths to chart our own path forward,” the mayor said at the CED event. “The seeds of our future success lie within the wealth of experience in our energy sector, technology, innovation, small businesses, women-led enterprises and within the arts sector.”
Gondek said the city must also retain its reputation as an energy production leader.
“Many of our large energy companies are already setting very ambitious targets, and they’re doing great work to innovate and to reduce their emissions intensity. This work must continue,” Gondek said.
“Our ability to compete on a global stage depends on taking the position of being a leader in the world of transition.”
The mayor pointed to the opportunity for the city to attract investments “on a scale that we have never seen before” by pursuing a net-zero future.
“The creation of net-zero asset managers initiatives that feature global banks and investment houses is a clear signal that capital will flow to places that are taking action,” Gondek said.
“Calgary must be at the table. We must be there to demonstrate our leadership and our expertise as part of this change so that we can generate new jobs and new businesses to be sustainable in the long term.”
The mayor added that by growing the arts sector and facilitating an inclusive recovery that gets more women to participate in the economy, the city can become more resilient and attract companies “dedicated to pressing global issues.”
“In these unpredictable times, the city of Calgary must be a source of stability for business, a focused convener of opportunities, a mindful community capacity builder.”
Declaring a climate emergency
During the municipal election campaign and in an interview immediately after being elected, Gondek said one of the first things she would do as mayor is to declare a climate emergency in Calgary to help attract investment.
City council is still in a transition period, and its first organizational meeting to select committee appointments is on Monday. The first full meeting of council is on Nov. 15.
The federal government declared a climate emergency in 2019, and Edmonton, Vancouver, Toronto and the National Assembly of Quebec are among the jurisdictions that have all made similar declarations.
On Wednesday, Gondek said part of the reason to declare a climate emergency was to change the city’s reputation as just another oil and gas producer.
“If we focus on talking about the processes and transition over time towards more sustainable solutions and production methods, that’s pretty clear that we are a sector that is evolving,” the mayor said.
“I’m less worried about the output that is delivered by energy production and much more concerned about telling the world what it is that we’re doing to use innovation and technology to be a more responsible and sustainable producer.”
Richard Masson, executive fellow at the University of Calgary’s School of Public Policy and chair of the World Petroleum Council in Canada, said most large oil and gas companies are already working on reducing their emissions.
The Oil Sands Pathways to Net Zero alliance — which includes Canadian Natural Resources, Cenovus, Imperial, MEG Energy and Suncor — has committed to a 97 per cent reduction in its emissions by 2050.
“They’re fully aware of what’s going on in the world, what’s going to happen at (United Nations Climate Change Conference in 2026), what governments are trying to do with their with their regulation, and so this declaration doesn’t really change anything,” Masson said.
“What it does do for Calgary (is to) say, ‘We recognize climate change is important.'”
Time and optimism
Hirsch’s prognostications were unclear on when the province’s economy would make up for growth lost to the pandemic, saying that ground could be made up by 2023 or 2024.
Speaking with reporters after her speech at CED, Gondek was “fully aware” that the city’s economic recovery would likely take up much of her current term of office.
“I have a lot of foundational work to do, as does the council that I’m working with, and all of us are realists,” the newly elected mayor said. “We know that this will be a lot of heavy lifting.
“It will be making important decisions that are rooted in empirical evidence. It will not be ribbon cuttings and ceremonies celebrating exponential success.”
The messaging from the speakers at the economic outlook, including Hirsch, Gondek, ATB president and CEO Curtis Stange, CED interim president and CEO Brad Parry, and Minister of Jobs, Economy and Innovation Doug Schweitzer, had a common theme: there is a reason for optimism in the province’s future.
Hirsch said the economy’s recovery could take a lesson from the centuries-old Japanese practice of kintsugi, where lacquer mixed with precious metals is used to repair broken ceramics, treating the break and repair as part of the history of an object.
“By embracing damage, we can be transformed into something that, in fact, is stronger and more resilient.”
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