Alberta is one of the western provinces that has been reviewed as wealthy because it has a commodity based economy focusing on oil. The prices of this commodity however, is declining fast. Alberta’s GDP is made up by the energy sector (25% ). The current oil prices are not sustainable. Oil is currently in $30-$40 range per barrel.
Alberta has always been fortunate to have a top credit rating (a triple-A rating), something it has been able to maintain even with the recent economic woes. While the good credit rating is staying currently, the future does not look as sunny. The reason? The province of Alberta owns Alberta Treasury Bank (ATB). Currently ATB has more loans outstanding than in deposit. In 2015, there was 37 million in loans outstanding and $30 million in loans in deposit. These loans are a risk to Alberta’s overall credit rating. Right now, the risk is small, but it is growing and it can keep growing to a size where it can do serious damage to Alberta’s credit rating. You might be wondering why ATB kept lending? They wanted to keep a cash flow for small and medium businesses in this time of economic bust. Basically, they followed the old motto, you got to spend money to make money. ATB also wanted to increase their market share and saw this as an opportunity. The NDP government approved their decision.
How is the NDP government reacting? Their goals are job creation and diversification of the economy, so that future hits to the price of oil does not wound Alberta so critically. The goal for the new budget is only have 15% of the GDP of debt. .There are two areas that the NDP government will not use to raise funds; a provincial sales tax and health care levy. A recent report, Diversifying the Alberta Economy: Capitalizing Intangible Assets highlights the importance of intangible assets in economic success.
The official opposition, the Wildrose Party wants to host a job summit. There are two purposes of for this job summit: (1) review the damage done to the economy and (2) see how government policies are affecting businesses.
Fort McMurray is the community that has been hardest hit by the energy downturn. Most likely because the energy industry is the backbone of city. There has been tens of thousands of layoffs. Most of these workers were in fly in and fly out positions. What makes their situation so much worse is that prices for rent and other living costs became inflated due to the isolation of the city as well as the previous success of the oil and gas industry. Rental properties are now 30% empty. There is a house on every block for sale. There are roughly 2 550 hotel rooms empty. The Fort McMurray airport is half as busy as it was this time last year. The food banks have soared in the demands needed. Fort McMurray is on the road to looking like Detroit after the auto-industry bust in the United States.
The current economic problems in Alberta are creating more and more unemployment. In December, the unemployment rate was 7%. with the loss of 3 900 jobs. Every person in Alberta likely knows someone who has been laid off due to this economic downturn. The purpose of this article was to provide information and not to give an economic solution. I understand that this a touchy subject for many. Albertans all have their own ideas on how to turn the economy around.