Alberta to face uphill battle; B.C economy to thrive in 2019: RBC Economics

• Alberta economy expected to slow in 2019: RBC Economics forecasts the pace of growth to slow to 1.5 per cent in 2019 from 2.4 per cent in 2018.
• Canada’s economy to face challenges: Canada’s GDP growth expected to drop 0.2 percentage points to 1.7 per cent in 2019.
• Global expansion to continue, but downside risks are growing: Global economy forecasted to expand by 3.7 per cent, matching the previous two years.

TORONTO, Dec. 12, 2018 /CNW/ – Two of Canada’s western provinces are expected to take diverging paths in 2019, according to the latest RBC Economic Outlook Report.

Oil production cuts in response to pipeline constraints and volatile oil and gas revenues will contribute to a slow-down in growth for Alberta next year. RBC projects Alberta’s growth to decline to 1.5 per cent in 2019, from 2.4 per cent this year.

“The oil production cut could lower GDP growth in Alberta by as much as a percentage point relative to prior assumptions,” said Craig Wright, Senior Vice-President and Chief Economist, RBC. “However, the impact will depend on how prices and inventories respond to the cuts.”

Meanwhile, British Columbia’s economy is expected to thrive in 2019. LNG Canada’s $40 billion natural gas project will provide a significant boost to the province’s economy. RBC Economics forecasts 2.6 per cent growth in 2019, jumping from 1.9 per cent in the previous outlook. The higher pace of growth is likely to continue into 2020.

“Given that LNG Canada has indicated that it will spend $18 billion in Canada in the first five-year phase, mostly in B.C, we expect this activity will provide a shot in the arm to the provincial economy,” said Wright. “However, this also has the potential to cause further strain on a tight labour market.”

With record-low unemployment levels in B.C, there isn’t much local labour remaining. The shortages could put upward pressure on wages and businesses will likely look to international and interprovincial immigration to fill the gap.

Canada to face challenges in 2019
Slumping oil prices and higher interest rates weighed heavily on Canada’s economy in the latter part of 2018 and should have a similar effect into next year. Regulatory changes and rising rates will weigh on household spending 2019. While modest increases in investment, outside the energy sector, and exports will be accompanied by another year of government spending. RBC Economics forecasts Canada’s GDP growth to decrease by 0.2 percentage points to 1.7 per cent in 2019.