Improving financial literacy crucial as economy slows in Alberta

By: Charles St-Arnaud , MsC Chief Economist, Alberta Central

Consumer spending, record population growth, high oil prices and employment are all factors that have carried Alberta through the past year. But can they carry us through the year ahead?

The province is facing economic challenges that could have a dampening effect. Growth is expected to slow in the coming year, before picking up in 2025. Global economic headwinds will impact Alberta throughout 2024. That impact is expected to be comparatively less than other Canadian regions, but the question remains — how can we ensure our resiliency and growth??

First, we need to understand not only each card as it’s dealt, but the hand we’ll have to play.

In almost every scenario, we still have some positive tailwind growth in Alberta that will allow the province to outperform the rest of the country. But we have some of the most indebted households in the country and there's still uncertainty on consumer finance.?

In terms of employment, so long as the hub of the labour market holds up and people have jobs, we'll be okay. But the public should be aware — this hold is tenuous. Insolvencies in Alberta are way above where they were pre-pandemic and have reached the highest on record. If the hold on labour slips, we could see an increased risk of loan losses and a subsequent impact on lending, which could prove unsustainable.

And what about the much lauded and oft-touted oil industry crutch? The reality is Alberta may not be able to lean on oil & gas as heavily as they have in the past.?

Albertans still have a strong belief that the period between 2005 and 2014 was normal. But when you consider it from a long-term perspective, it's possible what we experienced was not a once-in-a-century type of boom but perhaps once-in-a-lifetime. Albertans should consider all possibilities. When you look at 2022, we saw oil prices skyrocketing to $120 a barrel and it’s remained at a decent price. While this is a relatively positive backdrop, we haven't seen a? surge in investment in the sector? as a result, and the reason is the industry has changed completely.? A greater share of the revenues from extraction is not staying in the? province, which ultimately lowers its economic benefit for Alberta.?

Collectively, these potential challenges make financial literacy more crucial than ever and it should be top of mind for all Albertans. Households need to be equipped to face what's to come and make decisions that can ensure long-term financial sustainability.?

Though it's not entirely rosy, it's not all doom and gloom ahead either. In almost any economic scenario you can imagine for Canada, Alberta will most likely outperform the rest of the country in 2024.?

We know we'll have slower growth in the next year because there are some headwinds approaching due to higher interest rates. But we also may see some positive growth in the housing sector, particularly in Calgary. We also continue to experience huge population growth in Alberta; around 80,000 people will move to Calgary alone in 2024. That’s a big help for the local economy.

Ultimately, the first half of 2024 will be about keeping one eye on the horizon and preparing for any possible outcomes.