COVID-19 has had widespread impacts on the economy. The shutdowns had significant economic repercussions in the retail, arts and entertainment, tourism, service, and transportation (airlines) industries across the country.
Alberta also faced the additional impact of struggles in the energy sector.
The reduction in global oil demand caused prices to drop to levels far lower than what we have seen over the past five years. This resulted in a significant drop in capital investment and drilling activity. While prices have been recovering from the lows of the spring, some energy forecasters expect prices to generally remain below levels recorded over the past four years and below $50/barrel in 2021.
The economic impacts of further shutdowns at the end of 2020 will likely flow into the early part of 2021. Nonetheless, economic activity is expected to improve in 2021 following the significant retraction in 2020. However, with travel and social-gathering restrictions expected to persist until enough of the population is vaccinated, the hardest-hit industries – such as accommodation and food, travel, and energy – are expected to take longer to fully recover.
The government supports for businesses and households are expected to remain in place until the middle of 2021, helping to cushion the impact caused by the pandemic. However, given the global magnitude of the crisis, full economic recovery is not expected until late 2022 at the earliest.
Key factors impacting the Alberta economy in 2020
COVID-19 and the shutdown of our economy resulted in a sharp decline in growth, followed by a quick bounce back as the economy reopened. However, the economy did not bounce back to pre-pandemic levels and a second partial shutdown at the end of the year is expected to claw back some of the progress made.
The energy sector was hit particularly hard in 2020, as global oil demand fell and prices crashed. While prices have improved from the lows recorded early in 2020, they remain lower than the levels recorded when oil prices first fell back in 2014. While some mergers have already been announced, further consolidation in the sector is expected.
Final GDP figures for 2020 are not expected to be released until mid-2021, but Alberta is expected to be one of the hardest hit provinces in terms of economic contraction for 2020. It not only impacted our retail, tourism and airline industries, but also had a significant impact on the energy sector.
Low lending rates and government support helped prevent a more significant impact on the housing market.
Persistently high unemployment rates and significant job losses in some sectors of our economy dominated 2020.
Provincial figures point toward more people leaving the province than entering.This shift is due to some loss to other provinces, but also the significant drop in international migration. Thankfully, our young demographic has helped support population growth, albeit at slower rates.