OLDS — Alberta’s economy could boom as it emerges from COVID restrictions, but high unemployment, the Russian invasion of Ukraine, inflation and higher interest rates could hurt that growth.
That’s the essence of a speech Todd Hirsch, the vice-president and chief economist of ATB Financial, gave to the Olds & District Chamber of Commerce on May 2.
The occasion was the chamber of commerce's first lunch and learn session this year, held at the Royal Canadian Legion Branch #105. About 45 people attended the luncheon.
Hirsch said Alberta’s Gross Domestic Product (GDP) – the value of all goods and services produced in a given period – could grow by 4.5 per cent this year.
However, he predicted that pace will slow to around three per cent next year as higher interest rates, instituted to bring down inflation, take effect.
Hirsch predicted the Canadian Central Bank could hike interest rates by as much as two per cent between now and May, 2023.
“This is going to make it tough for mortgage holders, for people having to renew a mortgage, for home buyers. Great for savers,” Hirsch said.
“But it is going to act as bit of a retardant on the Canadian and the Alberta economies as the Bank of Canada struggles to get inflation pressures under control.”
Right now, oil and gas prices as well as prices for agricultural commodities like wheat and oilseeds are relatively high as the war in Ukraine makes it hard to export agricultural goods and the world looks at boycotting Russian oil and gas. Droughts in various parts of the world are another factor. Hirsch also noted it's unclear yet whether we'll experience another drought like last year.
However, Hirsch warned against expecting those prices to remain high. He noted commodity prices have been very “volatile” due to factors like the Russian invasion of Ukraine. But they could easily come crashing down, as they did in recent years.
He also predicted that as the world tries wean itself off Russian oil and tries to cut greenhouse gases, “peak oil,” the point where demand for that commodity no longer grows, could come fast and that could hurt the Alberta economy.
Hirsch predicted that the unemployment rate in Alberta will hover around six or 6.5 per cent, lower than it has been in recent years, but still higher than the nationwide rate of 5.3 per cent.
"Even though we are seeing some good job creation, it’s likely to take another year or two we think until that unemployment rate gets back down to a balanced, maybe four-and-a-half or five per cent. (I) don’t think we’re going to get there this year yet,” Hirsch said.
He predicted job growth will be mostly in the technology/digital field as well as in agriculture and agri-foods.
"I know this part of the province here, you’re kind of the epicentre of everything that goes on in agriculture and agri-foods,” he said.
Hirsch said inflation is spurring people to spend less. That too could slow economic growth in Alberta. One factor in that inflation is the war in Ukraine as commodities Ukraine and Russia used to export are in shorter supply.
Another factor are wage increases due to shortages of labour, partly brought on in the wake of COVID-19 restrictions, he said.