The drastic fall in oil prices is hitting Alberta hard with its real gross domestic product (GDP) forecast to contract 1.5% in 2015, according the Conference Board of Canada’s most recent Provincial Outlook report.
“The party appears to be over in Alberta, at least over the medium term, as low oil prices send chills through the economy,” says Marie-Christine Bernard, associate director, provincial forecast. “Several oil industry firms have already announced sharp reductions to their capital plans and to employment.”
The weaker oil industry will negatively affect the housing market, consumer sector and the flow of workers to the province.
One bright spot for Alberta is a strong demand for heavy oil in U.S. Gulf Coast refineries.
Saskatchewan will also be affected by declining oil prices but is still expected to grow by 0.8% this year.
“The provincial economy is not expected to go into decline, because industries such as potash and metal mining will be bright spots,” says Bernard.
However, the general economic malaise is expected to hit Newfoundland and Labrador, whose economy is forecast to decline 0.6%. It is estimated that $375 million in income is generated in Atlantic Canada from “fly-in/fly-out” workers who leave the region to find work in Alberta.
There is good news for the rest of Atlantic Canada. The production of goods in New Brunswick, Nova Scotia and Prince Edward Island is expected to benefit from the weaker loonie and a stronger U.S. economy. Each province is expected to see growth of more than 2% in 2015.
These conditions will also provide a boost to the remaining provincial economies.
British Columbia will be the Canadian leader in economic growth this year, with the province likely to grow by 3% in 2015. Ontario is right behind it with expected growth of 2.9%. This is higher than this year’s expected national growth of 1.9%, which is down from 2.4% in 2014.
British Columbia’s coffers will be helped by the strong performance that is expected from the manufacturing and transportation industries. Lower oil prices will mean extra discretionary income and increased consumer spending for Ontarians.
Quebec’s real GDP is expected to grow by 2.4% in 2015.
“The declining dollar and a stronger U.S. economy will push Quebec’s exports of goods and services to a new high in 2015,” says Bernard.
Household spending is also expected to rise by 2.1% thanks to a slight increase in the employment rate and lower gasoline prices.
Manitoba is another province that is expected to perform well in 2015, with potential growth of 2.9%. The province’s booming construction industry is forecast to grow at almost 10% annually over the next two years thanks to a host of public infrastructure construction projects.