It’s definitely frustratingly slow, but the provincial economy is moving forward in a positive fashion.
That was the message from one of the province’s more recognized economic analysts — ATB chief economist Todd Hirsch — at the Ponoka and District Chamber of Commerce meeting on Sept. 26 at the Ponoka Golf Club.
Hirsch noted the provincial economy took a nose dive in 2015, but that it is slowly rebounding, with an anticipated positive growth rate of 2.6 per cent this year and 2.2 per cent in 2019.
“Those figures are about half the rate of Alberta’s growth from 2010 to 2014. So, it is slower and that’s making people frustrated and stuck, but that is what happens when you go too fast,” he said.
Much of Hirsch’s talk focused on three specific themes that are shaping the economies in Alberta, Canada and globally — technology, trade and tyrannosaurus rex (aka Alberta’s energy sector).
Regarding technology, it’s all about how rapid the transformation has been and will likely continue, noting the world is now in what he described as the fourth industrial revolution.
“The first was in the 1800s with water, steam power and mechanization. The second in the 1900s with mass production, electricity and the telephone and the third went from about 1970 to around the turn of the millennium with automation, computers and space travel,” Hirsch explained.
“Now, we have ‘the Internet of things’ along with virtual reality, artificial intelligence and cryptocurrency. We are seeing an exponential growth in the pace of activity and impact of technology that is transforming the economy much like was done in the past.”
Trade was next and Hirsch stated that for much of the past 60 years, most countries felt it was beneficial to everyone’s economy to eliminate barriers and allow greater flows of goods, ideas, services and people. However, he added that thought process is looking like it’s changing for some.
“We recently have seen cracks and attacks on this notion with some countries moving toward being more protectionist,” Hirsch said.
“With Alberta and Canada being export oriented, this will have a negative effect and teaches us how important it is to diversify our trading partners.”
While the energy sector continues to take a bit of a beating, Hirsch is positive that hydrocarbons will remain this province’s fiscal backbone for the foreseeable future.
“Oil is going to power Alberta for several more decades, but we need to understand what the alternatives will mean because oil demand will peak and level off,” he stated.
“We all know that this sector has been the dog that wags a lot of tails in Alberta. When the demand levels off — anywhere between five and 40 years depending on who you ask — everyone agrees it is coming.”
And while the price of oil is better now than two years ago, people need to understand how a substitute will affect it concerning demand.
“The solar per watt price in 1977 was $76, and while things can go up exponentially they can also fall that way,” Hirsch explained.
“The current solar price is three cents per watt. And no, I don’t believe we all will be driving solar powered vehicles, we just need enough people in other places to do it.”
He added that driverless vehicles are taking off in areas such as San Fransisco — which has more people than Alberta — and in China, who have more people with a PhD than live in Canada.
“We need to think about these changing consumer patterns because the economics are there. And if you think things won’t shift that quickly, consider this,” he said.
“In 1900 on New York’s Fifth Avenue, there were horses and carriages and one automobile. By 1913, the horses were obsolete. That’s 100 years ago, so think about the pace of change we are seeing today.”
Lastly, while Hirsch feels energy will still hold up Alberta’s economy, there is a shift occurring in what is making the economy grow.
He noted that agriculture and agri-food — more specifically niche crops such as cannabis along with craft breweries and food and beverage manufacturing — as well as the technology sector, logistics and tourism are generating positive growth.
“I’m very optimistic because of some of these trends and this isn’t the first time Alberta has seen change or gone through a recession,” he said.
“As for oil, I think it will peak sooner than later, but the sector is an adapter. It’s shown that it is is still a pretty important sector, but it will not return to being the same growth engine that it once was.”
jordie.dwyer@ponokanews.com
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