Happy New Year! I am sure many of us are relieved to see the end of 2020. The past year has been plagued by a pandemic with just under 2 million lives lost around the globe, social isolation, global trade disruptions, record fiscal and monetary stimulus programs, historic unemployment, economic collapse, and a tumultuous US election. Could it have been much worse? It is easy to get lost in the dismay; however, out of the doom and gloom, there is opportunity and hope. Never in history has the world united to tackle something so devastating that could threaten our very existence. To be able to research, develop, and distribute a vaccine in under one year is truly remarkable – a testament to what can be accomplished with global cooperation.
COVID-19 has certainly altered the world in a way yet to reveal itself. Certainly, there will be significant change – how we work, shop, travel, dine, worship, invest, socialize, spend our leisure time, interact, develop social programs, deliver healthcare, engage in global trade, and prioritize both government and personal spending. Unquestionably, this change will significantly alter the business landscape.
Data
It has been difficult to predict the effect of the pandemic on the economy. With COVID-19 infections escalating during the second wave, Alberta is experiencing the highest per capita case count in Canada resulting in further restrictions.
Energy capital investment is just over half of what it was in the first quarter of this year and it is likely to take years to recover. With the Biden US administration set to take office this month, the future of the Keystone XL Pipeline remains in limbo, adding another level of uncertainty in an already struggling sector.
With steel supply not keeping up with demand, due to mill shutdowns and a COVID induced decline in productivity, steel pricing has continued to rise since May of 2020. Hot-rolled coil prices set records and could likely reach 1,000 USD/ton (www.thefabricator.com). New production capacity slated to come on line over the next 2 years should balance the steel market. CRU expects steel pricing to peak by February 2021.
According to Statistics Canada, unemployment exploded to 11.4% in 2020. Modest employment gains are expected over the next few years with the biggest change year over year in 2021 (see table below). It is interesting to note that despite higher provincial unemployment, average weekly earnings remained the highest in Canada. Unfortunately, employment losses due to COVID-19 were concentrated among lower-paid employees (Alberta.ca).
The agriculture sector appeared to be the light in the darkness. Ideal weather conditions in 2020 helped with the quality and yield of crops which were 4.3% higher than in 2019.
Last year, Alberta suffered the worst economic contraction in history and although real GDP is expected to improve over the next few years, it will likely not fully recover until 2023.
On the Horizon
ATB’s November 24 Webinar, “Adapting to Alberta’s Changing Economy – What if it’s easier than we think?” provides an insightful and hopeful message from Todd Hirsch. While the energy sector will remain flat, there are opportunities in three primary sectors:
Technology and digital: This sector has been more active over the last few years and will continue to grow with investment into eCommerce, production automation, digitization of customer/supply chains, health care, and education. Many organizations were forced to adapt very quickly to the COVID crisis and soon realized the benefit of investing in IT infrastructure.
Agriculture and agri-food products: Cannabis, chickpeas, beans potatoes and food/beverage processing has been growing over the last 20 years. In the past year, there has been growing support for shopping local, resulting in the growth of craft beer, distillers, and food processing. A recent decision to invest over $800M in irrigation will further encourage agriculture expansion.
Renewable energy and clean energy: Investment into wind and solar continues, along with innovation into geothermal and carbon capture and storage. The Alberta government is working towards developing a geothermal policy with the intention of “diversifying and strengthening Alberta’s energy sector.”
Looking Forward
Recovery will see provincial and federal governments investing in health care, infrastructure, and domestic production for essential goods and services, as well as establishing trade agreements with responsible and reciprocal trading partners. Manufacturing, agriculture, technology, health-related industries, and emerging forms of energy will see growth over the next decade. While it may take some time for Alberta to recover, the path forward may in fact protect the provincial economy from the volatility we have experienced by relying too heavily on one industry.