Following the steepest, deepest, and fastest recession in history, there are clear signs that the Canadian and global economies have begun the initial stages of recovery, according to the newly-released BMO Blue Book: Small Businesses in the Recovery.
But Canada and Alberta will still face stiff recessions this year.
The BMO Blue Book, published by BMO Economics and BMO Business Banking, forecast Alberta’s economy to contract by 7.0 per cent this year, the biggest decline in the country, while Canada’s economy will fall by 6.0 per cent.
In 2021, Alberta’s economy is expected to increase by 6.2 per cent while Canada’s will increase by 6.0 per cent.
“The province (Alberta) entered the downturn already in a position of relative weakness, and the steep decline in oil prices (and associated pullback in production) adds another headwind in the near-term. Production was down 15% y/y in May. The COVID curve in Alberta hasn’t been as steep as in Ontario and Quebec, and the province has been faster to re-open,” said the report.
“The CFIB (Canadian Federation of Independent Business) reports that almost 60% of small businesses were fully open as of mid-June. The unemployment rate held at 15.5% in June, and is expected to average 11.7% for all of 2020, versus 9.5% for Canada. The Province has rolled out roughly $4 bln in direct support measures. BMO Economics estimates that the deficit could be around $19 bln in FY20/21 (just over 5% of GDP), including a hit to resource revenues from low oil prices.
“In Alberta, the pandemic has added to pre-existing difficulties in oil & gas, office space, and agriculture. However we are seeing some optimism stemming from the Alberta Recovery Plan, which will see $10 billion in new infrastructure spending and a corporate tax cut. Stimulus from the government should help benefiting sectors ramp up; it has the potential to provide good opportunities to a number of our clients. We are continuing to watch this play out but expect it will help to stimulate the economy.”
The report said Alberta will also benefit from the beginnings of efforts to diversify the province’s industry base.
“It’s still early in the cycle, but the trend is clear and has the potential to help diversify employment opportunities, move away from dependency on certain industries, and shift residents toward a start-up mindset. What we’ve seen thus far is encouraging, even if it’s not yet relevant to overall GDP growth,” it said.
“We expect these efforts will all be incredibly valuable as the economy works to get back on its feet. We are also seeing a major difference between different cities and regions. The diverse economies of urban centres have led to better overall performance there, in comparison to the rural areas. That momentum will hopefully stimulate broader provincial growth, while rural marketplaces work to recover from a more pronounced downturn. One city that is sure to get a major boost is Edmonton. With the news that it has been selected as a host city for the NHL playoffs, this should act to revitalize the downtown and provide a lift to local businesses.”
