Tue 18 Mar 2008
Will U.S. Credit Crisis Hurt Alberta’s Economy?
Alberta Business Economic Financial News , Alberta Jobs and Labour NewsEvans says U.S. credit crisis unlikely to derail provincial investment plans
Tony Seskus and Tony Seskus, Calgary Herald, Archie McLean,
The Edmonton Journal, With files from Renata D’Aliesio,
Calgary Herald; The Edmonton Journal; Canwest News Service
Alberta’s new finance minister doesn’t expect a downturn in the U.S. economy to torpedo the province’s spending plans.
Iris Evans, who is planning how the province will invest in key areas such
as health and education, said Monday the billions of investment dollars
destined for the oilsands provide a buffer for the economy other
jurisdictions don’t have.
The escalating credit crisis in the
U.S. rattled North American stocks Monday, stirring fears of a pending
recession. But even as oil prices slid by more than $4 US per barrel,
Evans said Alberta is “relatively well off” because of the energy
industry.
“I don’t see it having an effect on spending plans,” Evans said,
adding there could be an impact if the problems drag on. “But at this
stage, they’re not ringing any alarm bells.”
The provincial government is expected to release its budget by early May.
Economists agree Alberta is well-positioned to weather an economic storm, but some
local industries are already hurting from the U.S. slowdown. And
Canadian investors who’ve poured their savings into equity markets are
being impacted by the market jitters.
Mike Percy, dean of the University of Alberta School of Business, warned that Albertans could
feel the pinch of the North American credit crunch.
“It’s clear that the sub-prime fiasco and the general crunch in credit markets is
going to affect everyone, regardless of where they live,” Percy said.
“You will find a tightening up of credit conditions and, whether you live in
Alberta or Ontario. In these types of credit crunches, no one or no
region is immune. Either credit will be unavailable if you have a
spotty record, or it will be available to you at a higher cost than it
had been.”
The Toronto Stock Exchange’s main index fell sharply
on Monday, reflecting weaker commodity prices and further worries over
how a stumbling U.S. economy will affect the rest of the world.
Canada’s main stock index dropped to its lowest point in five weeks, led by
Royal Bank of Canada and other financial companies. The drop came after
U.S. investment bank Bear Stearns Cos. was sold for $2 per share –
less than one-tenth of its market value as recently as Friday — to
avoid collapse.
In Ottawa, the federal finance department stressed that the domestic banking system is solid and
well-capitalized, but acknowledged Canada is not bullet-proof to market
uncertainty.
“As an open trading economy, Canada is not immune to
the growing uncertainty in the United States and on global markets,”
said Finance spokesman David Gamble.
In Edmonton, Evans said Alberta’s economy is on solid ground with the long-term investment of
the oilsands unaffected by the ebb and flow of markets.
“Alberta will be relatively well off because we’re safer,” she said. “I think
the long-term investments in the oilsands really protect us, so there’s
a sustainability to our economy that isn’t there elsewhere.”
Brett Gartner, senior economist at the Canada West Foundation, said the slowdown in the U.S. is “real and it’s deep.”
“But I am still holding strong to my belief and my view that Alberta
– and the West in general — are fairly well positioned to fare better
than the rest of Canada and will not be dragged down completely by the
U.S.,” Gartner said. Gartner said some of the good news for Alberta is
the strength of the economies in China and India, which keeps energy
markets strong.
However, Percy cautioned the provincial
government has significant economic challenges. The province will want
to meet public demand for infrastructure without “overheating an
already heated economy,” he said.
Some sectors are still being hit hard.
Alberta’s $11-billion forestry industry, the province’s
third-largest economic sector, is alarmed by its financial state and
the fallout for 47,000 workers.
Brady Whittaker, the executive of the Alberta Forest Products Association, points to high energy and
utility costs, a buoyant Canadian dollar, the softwood lumber agreement
with the U.S., the American housing crash and the province’s mountain
pine beetle infestation as challenges for the industry.
In the past year, 1,000 forestry jobs have been cut, while 1,500 to 2,000
indirect positions, such as logging and transport contracts, have
evaporated.
Like the forestry industry, Alberta’s cattle
producers are suffering, too — and looking for export markets outside
of the sluggish U.S.
Erik Butters, chairman of the Alberta Beef
Producers, said the industry is facing a double-whammy: a Canadian
dollar that rose rapidly and soaring feed prices due to the biofuels
boom.
“We probably could sort of withstand one or the other,”
Butters said. “But to have them both at once has proven extremely
difficult.”
But Butters is expecting a turnaround through higher food prices.
“It would be nice to just get back to a profitable margin because we are far from it right now,” he said.
Related Alberta Jobs:
- Canada high-paying and high-quality full-time jobs
- Canadian jobless rate falls to 33-year low of 5.8 per cent in January
- Alberta group wants English training for foreign workers
- Fed finance minister says Ontario may become have-not province - we could foot the bill
- Manufacturing Job Losses Frustrate Ontario
Leave a Reply
You must be logged in to post a comment.
