On November 1, 2023, Mark Parsons, ATB’s Chief Economist, took the stage at the Calgary Economic Development’s 2024 Economic Outlook, powered by ATB Financial, to discuss the economic forces shaping Alberta’s economy for the year ahead.

Lately, uncertainty of the economy has been a sentiment that many Albertans have been feeling. Navigating the economic landscape is like skating on thin ice: just as you can't predict the exact thickness of ice on a frozen lake, uncertainty in the global economy is high and it’s best to prepare for a range of possible outcomes - a view echoed in Stephen Poloz’s talk.

The presentation started with Parsons highlighting the major challenges that the Alberta economy faces as we enter 2024. Stubborn inflation, interest rates, supply chain disruptions and global instability are creating strong headwinds now and into 2024.

Alberta is drafting through the headwinds

Alberta's economy is expected to slow next year, but will weather inflation and interest rate headwinds better than other provinces. The province will rank as one of Canada's growth leaders. There are three key factors helping to position Alberta’s economy favourably and minimise the effects of the economic headwinds.

The Alberta energy story

Alberta’s energy sector is recovering and is forecasted to grow over the next three years. Parsons explained, “A big part of why Alberta is going to outperform the national economy going into next year is because of what I would consider our anchor industry [energy] which we expect to grow, not to where it was in 2014, but is expanding nonetheless.” Higher capital investment will be supported by healthy oil prices and improved market access, with TMX coming on line next year and CoastalGas Link completed.

Record population growth

Alberta saw over 184,000 people added to the province in one year - that’s a record. The last time we had a population growth rate like this was in 1981. Record inflows of net interprovincial migrants is leading to a faster population growth in Alberta than other provinces. Parsons pointed to Alberta’s relative housing affordability—especially in comparison to Ontario and B.C.— as a major driver of these recent inflows.

“We’re getting a disproportionate number of people coming from BC and Ontario—almost seventy-five per cent—where in the past it was only fifty per cent or less.”

The focus here needs to be on making sure housing meets the demands of this population growth. “We are playing catch up on residential investment. We need many more homes to be built to account for the significant influx of people coming to the province,” he explained. ATB expects that home construction will pick up next year following a pullback in 2023.

Diversification of the economy

The province is seeing a wide range of emerging areas of growth. Mark gave the analogy of the ‘diversification door’ widening and a broader range of activity fitting through. He highlighted that diversification can happen within a sector, giving examples of diversification within energy. “Hydrogen and renewable fuels, including Air Products’ $1.6 billion dollar hydrogen facility…petrochemicals, we’ve had some recent expansion there.”

In addition, there is more activity in aviation, food manufacturing, tourism, critical minerals and emissions reduction investment (e.g. carbon capture and renewables).

As for technology, Mark referenced PitchBook’s recent report that indicates Calgary as the twelfth high tech global growth location globally. Moreover, Calgary ranked second for tech talent workforce growth in North America, according to CBRE’s Tech Talent 2023 report.

Alberta’s expansion to continue

Alberta’s economy has moved from recovery and is now in expansion mode. ATB’s forecast for Alberta’s real GDP (gross domestic product) growth for 2023 is 2.7%. As we are expecting inflation to be “higher for longer”, our growth forecast for 2024 is 2.0% and is expected to rise to 2.6% in 2025. Parsons underscored the resilience of Alberta’s economy saying, “Alberta has stayed above the other provinces for GDP per capita for a very long period of time and we expect this to continue throughout 2024.”

Key takeaways

The overall sentiment from Parsons was that while ice conditions are uncertain, the province has some strong fundamentals to help navigate it safely.

Mark concluded by drawing a parallel between an elite athlete of today,with advanced equipment versus an elite athlete from the past using simpler equipment—both athletes may be equal athletically but the equipment can make a significant difference in their performances. “We have a strong economic athlete with natural resources, a rapidly growing population and skilled workforce, above average levels of investment and productivity,” says Parsons. “The question is, are we going to be able to equip this athlete with the latest tools to adapt to changing global trends to counteract the economic headwinds we’re currently facing.”