Alberta will suffer through a recession in 2020 where the GDP will contract by a nation-leading 8.2 per cent year-over-year, says a report released Monday by RBC Economics.
The Provincial Outlook report said the Canadian economy will fall by 4.9 per cent.
“The outlook for oil-producing provincial economies is especially grim. The collapse in oil prices already delivered a brutal blow to businesses in the sector. Unfortunately, we expect oil prices to recover only very gradually over the coming year,” said the report.
“Facing drastically reduced cash flows, producers are slashing investment and employment, and trimming output. We project employment to plummet by 440,000 in Alberta and 80,000 in Saskatchewan during this crisis. These represent nearly seven times and five times the losses suffered during the 2015-2016 recession, respectively. We see the unemployment rate surging to 20 per cent in the current quarter in Alberta and 15 per cent in Saskatchewan—both never-before-seen levels in these provinces.”
The report said the immensity of the COVID-19 shock to the Canadian economy is rapidly sinking in. The mind-blowing one million job losses recorded nationwide in March far exceeded anything we’ve ever experienced, said RBC.
“What’s more disturbing is this is likely to pale in comparison to the losses that will be reported for April. No region of the country is being spared from the shock. We have downgraded our provincial growth forecast (yet again!) across the board in light of recent developments and dynamics currently at play. We now project all provinces will slip into a severe recession this year. Still, we remain of the view the eventual easing of social distancing measures and unprecedented policy response will set the stage for a recovery (albeit partial) in the second half of 2020, returning provincial growth to the positive column in 2021,” it said.
“The economic impact of COVID-19 will be widespread across the country irrespective of the number of cases in each province. This is because social distancing orders are in place everywhere and are directly disrupting big chunks of each provincial economy. Highly impacted industries like retail trade, transportation services (including airlines), education, arts and recreation, and food and accommodation services generally account for roughly one-third of jobs, and 20 per cent to 25 per cent of provincial GDP. Large portions of these industries going offline for a period of a couple of months would easily subtract between three and four percentage points from growth right off-the-top in most provinces.”
