ATB Financial is forecasting that Alberta's economy will contract in 2015 — a more pessimistic view than in early July when the bank said the province would likely avoid a recession this year.
ATB anticipates modest growth of close to 1.4% in 2016, after a contraction of 0.7% of Alberta's real GDP in 2015, according to the bank's fourth quarter economic outlook.
That compares with real Gross Domestic Product growth of around 4% in 2014, when oil and gas prices were much higher.
ATB says the drop in oil is the "single reason" for the economic challenges, as prices have fallen to about $45 U.S. a barrel at present from more than $100 U.S. in the summer of 2014.
The drop in oil prices has caused energy companies to drastically cut costs, leading to further job losses as well as reductions in both wages and overtime hours.
ATB is predicting the unemployment rate will rise to 5.9% this year, up from 4.7% last year, before improving slightly to 5.7% next year.
The report noted that continued euro-zone nervousness and instability in the Chinese stock markets took the price of oil below $38 U.S. per barrel at the end of August. Oil prices are expected to remain low and volatile.
Alberta's agriculture sector was also hit by dry weather, which led to disappointing results for crop production in the province's second largest sector.
On the positive side, the report noted forestry remains in decent shape, supported by strong prices for lumber, a resurgent U.S. economy and a low Canadian dollar.
Cattle prices remained solid and hog prices experienced a bit of a rebound.
