As 2021 draws to a close, you are probably looking ahead at what to expect for the coming year. Alberta Central – the central banking facility, service bureau and trade association for Alberta’s credit unions – has published a 2022 Economic Outlook written by Chief Economist Charles St-Arnaud. The Outlook has insights on challenges and opportunities for our economy in 2022. Here are some highlights:
The oil and gas sector had a significant bounce back in 2021, with production values reaching all-time highs. Despite these high revenues, we should not expect a return to the pre-2015 boom years in 2022 because energy producers remain focused on repairing their balance sheets, improving profitability and tackling the challenges of decarbonization, climate change and energy transition. Still, the rebound will support income, employment, investment and government revenues.
The housing market in Alberta is expected to remain strong throughout 2022. We expect the Bank of Canada to start raising rates in April, which will start to cool off the market in much of Canada as the higher interest rates will reduce affordability. However, since housing in Alberta is more affordable than other areas of Canada (see Rising interest rates to make many Canadian cities unaffordable), interest rate hikes will not affect the housing market here as much.
Alberta’s economy is expected to grow 4.2% in 2022, which is higher than the 3.8% expected for the rest of the country. At some point in the year, the economy is expected to expand beyond its 2014 peak.
Economic recovery will continue in 2022, but at a slower pace than 2021. Employment recovery is the strongest since the 1980s despite more significant job losses. However, labour shortages are a major issue limiting business’ capacity for growth.
Many households have benefited from an increase in disposable income and savings during the pandemic. Consumer spending will depend on how quickly the government support programs are phased out and whether households decide to spend the savings accumulated during the pandemic.
Inflation is expected to remain elevated around the world in 2022. This is mainly due to supply constraint, higher commodity prices and to a lesser extent, a rebound in demand. The Bank of Canada is expected to start raising rates in 2022, with rates at 1.0% by year end.
Read the full 2022 Economic Outlook for details on these issues and more, including:
- COVID as an atypical recession
- A mismatch between supply and demand
- Global monetary policy tightening
- The Canadian economy in 2022
- What to expect in Alberta?