Alberta’s government is forecasting the province’s economy will contract this year due to low commodities prices and continued global economic volatility.

In an economic update delivered on Thursday, the government forecast that its economy will contract by 2% this year, resulting in the loss of 15,000 jobs and a rise in Alberta’s unemployment rate to 5.8%. The province’s economy is expected to recover beginning in 2010 with modest growth.

“We have always said Alberta’s economy, while stronger than most, would not be immune from the turmoil that has gripped economies around the world,” said Iris Evans, minister of finance and enterprise. “Plunging energy prices, unsettled international financial markets, a drop in demand for our exports and other effects of the global recession have put Alberta in a much different position than we were in just six months ago.”

Evans said Alberta is well positioned for recovery, with low unemployment and inflation, a strong resource base, a competitive tax regime, an investment- and business-friendly environment, significant financial assets, and a fiscal framework designed to deal with the ups and downs of volatile resource revenues. “As we emerge from these turbulent times, we will position Alberta to be the engine of the Canadian economy,” she said.

The Alberta government’s plan for weathering the downturn includes keeping a close eye on government spending, drawing from its emergency savings to protect services, continuing to build public infrastructure, and promoting the province to a global market.

“Investing in infrastructure has long been part of Alberta’s economic strategy and it will continue to be,” Evans said. “It is particularly critical during economic times like these. It gets people working; improves and builds needed roads, schools, and hospitals; and injects capital into the economy.”

The government said it is also providing support for industries that have been hardest hit, such as agriculture, forestry, and oil and gas. This includes a new incentive program that will provide short-term, targeted assistance to junior energy companies – details of which are currently being developed.