RBC chief economist Craig Wright, shown in a 2014 file photo, said Thursday he is more concerned about the federal deficit than the economy in Alberta, which he expects to grow faster than almost any other province. MICHELLE SIU / THE CANADIAN PRESS, FILE
Increased exports and strong job creation mean the economy should grow faster in Alberta than in almost any other province this year, RBC chief economist Craig Wright said Thursday.
He described the 2.3 per cent increase he expects in gross domestic product, exceeded only by the gains in Saskatchewan, as a “bounce” following years of recession, rather than part of Alberta’s traditional boom-bust cycle.
“We don’t have the big energy investment that we had in the previous boom periods to count on to lift growth prospects,” he said following a speech to the Economics Society of Northern Alberta.
But the province is still recovering from the hit it took after oil prices cratered in 2014, so Wright isn’t worried Alberta’s $10.3-billion deficit will overheat the economy.
“I probably wouldn’t say this to the minister of finance, but I wouldn’t get terribly stressed about the fiscal situation in the province, because there’s capacity in the economy.”
As well, the ratio of the provincial debt to the provincial economy is much lower than in most other jurisdictions, he said.
An RBC research report last September estimated Alberta’s net debt in 2017-18 at $22 billion, or 6.8 per cent of the gross domestic product.
Although this figure is expected to rise, it’s far better than anywhere else in Canada — the next best result is in Saskatchewan, where the debt ratio is 15.2 per cent, the report indicates.
Wright is more concerned about the federal deficit, saying the national economy is so strong that Ottawa’s spending stimulus is helping create the need for higher interest rates to stop inflation.
“I would think at some point we would want to see a balanced budget.”
The biggest source of uncertainty he sees in the short term is the possibility the United States will pull out of the North American Free Trade Agreement (NAFTA) even though Canada is the first- or second-largest trading destination for 37 American states.
While there are too many variables to be sure of what that would mean, energy is one of the most vulnerable sectors, he said.
However, the end of NAFTA shouldn’t be catastrophic — if Canada instead traded with the U.S. under World Trade Organization tariffs, this would likely cut national economic activity by one per cent over 10 years, or about $20 billion.
“That’s not ideal, but we could manage through that.”
gkent@postmedia.com