‘Navigating through uncertainty’ was the theme behind a Red Deer Chamber of Commerce luncheon on Thursday.
Servus Credit Union’s vice president of treasury, Rajat Varma shared his outlook on interest rates, housing and the oil and gas industry for 2019.
With issues surrounding China, North Korea, Russia, Venezuela and Brexit causing uncertainty around the world, Varma feels Alberta will cope better than most provinces, as we’ve been through them before.
“I think there’s a lot of resilience in the province here and we just need to find that a little bit quicker than we have in the past,” explained Varma. ”2019 is going to be a weak year for Alberta, a lot of pipeline and capacity issues weighing on us and the Enbridge Line 3 was a big blow. The production cuts have helped somewhat but it’s going to take more than that, we’re going to have to solve our pipeline capacity issues long-term to really see a turn-around there.”
In terms of Alberta’s labour market, Varma admits wage growth has been low but the number of jobs has been strong.
“We’ve been able to move away from energy-related jobs to other industries,” he noted. “Job growth has still been there, although it’s not as strong as it has been historically. It’ll take time for the economy to kind of find that base again, whether that means there’s jobs outside of the province that people will move towards or what have you, but overall in-balance within Canada, the job market is still solid.”
Varma describes Alberta’s housing market as a tale of two cities but with a large correction unlikely.
“We’ve seen a large price run-up in a lot of the metropolitan communities across Canada,” he exclaims. “Not so much in Edmonton and Calgary but if you take the last three years, Edmonton and Calgary have actually performed better than a lot of those metropolitans which have been affected and more so, more pronounced by all the mortgage rule changes.”
However, Varma points to the Trump presidency in the United States as another issue with far-reaching impacts on Canada.
“We’ve been a little bit of a political hostage in some of the negotiations and it’ll take time,” says Varma. “They’re making progress, the U.S. and China and the sooner they can resolve their trade issues, the sooner we can get back to a productive economy.”
Looking ahead, Varma expects ‘muted growth’ to continue for the province this year, noting Alberta’s GDP is forecast to be the lowest in the country at roughly one per cent.
With interest rates near all-time lows, Varma anticipates no more rate increases for 2019, adding the chance of a ‘technical recession’ or two consecutive quarters of negative growth this year as well.
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