Alberta facing possible third recession in a little more than a decade
It’s no secret that Albertans have suffered a great deal of economic pain in recent years. Sharp recessions that began in 2009 and 2015 caused unemployment and hardship across the province.
Although Alberta experienced a strong recovery from the 2009 recession, with rapid growth in subsequent years, the same was not true of the 2015 recession. The recovery since then has been comparatively tepid, and provincial GDP has stayed well below the pre-recession trendline. Indeed, inflation-adjusted GDP per person in 2018 still had not recovered to its 2014 level.
The combined effect of the two recessions and a weak recovery from the one that began following the commodity price collapse of late-2014 has been a protracted period of nearly complete stagnation of inflation-adjusted economic growth. The chart below shows the sobering statistics. It presents inflation-adjusted (using 2012 dollars) GDP per person in Alberta from 2008-2018.
From 2008 to 2018, inflation-adjusted per-capita GDP in Alberta increased by an almost entirely negligible 1.6 per cent. In other words, once you adjust for inflation and population growth, Alberta’s economy barely grew at all between 2008 and 2018.
Now, due to another big drop in oil prices and the economic effects of the COVID-19 pandemic, the provincial economy is almost certainly contracting again.
The scale of the damage remains to be seen, but political leaders are telling Albertans to prepare for severe challenges ahead. Premier Kenney recently issued a sobering warning, stating that the province is “facing a period of profound adversity unlike any we have seen since the 1930s.” Economic forecasts are also becoming increasingly bleak, with a new forecast from RBC Economics predicts the province will slide into recession again this year, with thousands of jobs lost. Another recession would wipe out even the vanishingly small amount of aggregate per-person growth that occurred since 2008.
After an extended period of almost no growth, Albertans were hoping that the 2020s would get off to a good economic start, that the province’s recovery from the last recession would accelerate, and prosperity would return to the province. Instead, sadly, the near-term outlook now looks bleak and forecasts suggest Albertans should expect still more economic hardship.
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