So long surplus — at $50 oil, Alberta is now worrying about the 'R' word: recession
Cheap oil has Alberta worried about recession, and Ottawa's dreams of a surplus have vanished
Tonight's first order of business, measuring the pain from lower oil prices. That there will be pain isn't in doubt but new analysis suggests that for Alberta, it could mean an outright recession, with billions less in government revenue slowing growth all over, and the federal government may not hang on to its planned surplus, according to separate research. All in all, a sobering look at what's in store, but there's still plenty of time for both levels of government to respond before it actually happens.
— Amanda Lang
Two separate conclusions. Each similarly bleak. Falling oil prices will likely put a surplus out of the federal government's reach this year. And Alberta is at risk of a recession.
The first warning comes from TD Economics. It did the math on how low oil prices will impact federal coffers and says the "conclusion is unambiguous" — Although Ottawa has projected a surplus for 2015-2016, TD expects budget deficits this year and next. That will "leave no room" to announce promised measures, like a doubling of the TFSA contribution limit, or an Adult Fitness Tax Credit.
The Conference Board of Canada's analysis hones in on the impact to Alberta. Its chief economist says the province is "likely to slip into recession" this year. His forecast is partially based on what happened when oil prices fell during the last recession. That time, engineering investment in the province pulled back by about $18 billion. 30,000 mining jobs vanished. And housing starts plunged 75 per cent. The Conference Board expects a similar outcome this time around.
Amanda Lang discussed Alberta's changing fortunes with Glen Hodgson, chief economist at the Conference Board, to open Tuesday night's episode of The Exchange with Amanda Lang.