Alberta's economic rebound poised to continue in 2022, RBC Economics forecasts

Alberta's oil-and-gas fuelled economic recovery shows signs of continuing into next year, according to a new forecast from RBC Economics.

The report released Thursday predicts that Alberta's economy will grow by 4.7 per cent in 2022 — behind only Saskatchewan's 5.6 per cent — after tying Quebec for top spot with 5.9 per cent growth in 2021.

It forecasts an unemployment rate of 6.7 per cent in 2022 (down from 8.7 per cent this year) and falling to 5.3 per cent in 2023.

"Amazing what a rebound in global oil and gas markets will do to Alberta's economy," the report said. 

Earlier this week, Alberta Finance Minister Travis Toews said the province's updated fiscal outlook predicts five times as much bitumen royalties to flow into provincial coffers compared with the budget forecast last February.

He said that will drive down the forecast deficit this year to $5.8 billion — substantially lower than the projected $18.2-billion deficit for 2021-22.

The research firm says its optimistic forecast rests on several factors, including stronger drilling activity, new pipeline capacity and an expected uptick in capital expenditures in the energy sector — "though they will remain a fraction of what they were before oil prices crashed in mid-2014."

The report also predicts economic growth will be supported next year by improved labour market conditions, rising consumer confidence, strong household savings and more immigration that should boost consumer spending and housing sales. 

"As long as conditions hold up, we do expect that Alberta will continue to recover next year and will fully recover next year," said RBC economist Carrie Freestone.

There are also signs of growing strength in Alberta's renewable energy sector, RBC says, noting 61 solar projects are underway and set to be operating by the mid-2020s.

"We believe Alberta is well positioned to attract more investments of this type and size in the years ahead," the report said.

Alberta is still playing catch up, though, compared with most other provinces, the RBC report says.

The pandemic gutted Alberta's GDP to the tune of eight per cent in 2020, at a time when the province's finances had not yet fully recovered from the 2015-16 recession.

"So Alberta will take a little bit longer to fully recover from the pandemic compared to other provinces. And that is because Alberta was dealt a cruel hand and had to face plummeting oil prices at the same time as this unprecedented pandemic," Freestone said.

The report notes the recent discovery of the omicron variant of COVID-19 "presents a downside risk" to its forecasting.

"There is a great deal of uncertainty surrounding the severity of the variant and the required intervention to stop its spread both at home and abroad," the report said.

"Should additional restrictions be necessary, this would impact the trajectory of provincial output growth in 2022."