Varcoe: A no-growth economy is Alberta's top business story of 2019 - Calgary Herald - Canada News Media
Connect with us

Economy

Varcoe: A no-growth economy is Alberta's top business story of 2019 – Calgary Herald

Published

on



Pictured is a power line with the downtown skyline in the background in Calgary on Thursday, October 17, 2019. Azin Ghaffari/Postmedia Calgary


No growth or slow growth, it doesn’t really matter what you call it.

The tale of 2019 is just about over and it’s unclear whether the province slipped back into an economic recession during the past 12 months or narrowly avoided it.

But many Albertans felt like they were mired in a downturn with high unemployment levels, less consumer spending and sluggish activity in the energy, housing and construction sectors.

It was a year when the provincial economy spun its wheels like a car stuck in an icy rut.

Oil production quotas, trade troubles for canola producers and a major petroleum producer relocating its head office to the United States added to the dreariness.

“The biggest story is no growth in the economy,” says Ken Kobly, chief executive of the Alberta Chambers of Commerce. “Until we get some positive news, we’re going to be sitting in the doldrums.”

The economic slowdown was the most important business story of the year in Alberta.

Politics also played a huge factor during 2019, with voters electing a new provincial UCP government and a minority Liberal government in Ottawa.

The surprising acquisition of WestJet Airlines by Onex Corp. and Calgary’s business tax revolt also commanded headlines, as did battles over energy policies and pipelines.

However, the low-growth, no-growth economy was an overarching theme with far-reaching implications.

Here are my top business stories of the year for Alberta.

1. Flirting with a recession — A punishing

in the middle of this decade gave way to two years of economic expansion, but 2019 stopped the momentum in its tracks.

Progress initially came to a halt following a steep downturn in Alberta oil prices last fall caused by a lack of pipeline capacity. The Notley government introduced temporary oil production limits this year which buoyed crude prices, but limited industry investment.

Overall growth in employment drooped over the back half of this year. In November, the jobless rate in Alberta jumped to 7.2 per cent, a full percentage point higher than a year earlier.

“Don’t blame Albertans for thinking their economy is still in recession,” RBC said in a report this month. “The level of activity in the province is still below what it was in 2014.”

There are a few reasons to feel more enthusiastic heading into 2020, but the past year has definitely been a downer.

“2019 was the year of (playing) defence … flirting with recession,” says Martin Pelletier, a portfolio manager at TriVest Wealth Counsel.


An abandoned kitchen space for lease along Kensington Road and 10A Street N.W.

Brendan Miller/Postmedia

2. Exit Encana — As one of the country’s largest petroleum producers, Calgary-based Encana Corp. has a history firmly rooted in Alberta.

Created by the $27-billion merger of Alberta Energy Co. and PanCanadian Energy Corp., the company’s name combined “energy” and “Canada” to reflect its home turf.

Under the leadership of CEO Doug Suttles since 2013, Encana has been gradually shifting its attention toward the U.S., punctuated by the US$7.7-billion purchase of Newfield Exploration last year. And the Texan began working out of the company’s Denver offices last year.

Yet, when Encana announced in November it would change the company’s name to Ovintiv Inc. and move its corporate domicile to the U.S. (pending shareholder approval), it commanded national headlines, becoming a symbol of the Alberta energy industry’s uncertain future.

Encana insists the relocation will help it attract larger pools of investment and stressed it still has about 1,100 people working in Canada. It later confirmed its new head office would be based in Denver.

Political analyst David Taras of Mount Royal University says the relocation is “symbolically a big story” given the Canadian oilpatch’s recent woes.

“If Encana can leave, what’s next?” he says.


Encana Corp. a leading oil and gas producer in Calgary, is moving its headquarters from the Bow building to the U.S. and is changing name to Ovintiv.

Postmedia

3. A political year — With two crucial elections fought in just 188 days — and a series of incendiary federal-provincial battles waged during the year — the shadow of politics loomed over Alberta businesses in 2019.

UCP Leader Jason Kenney’s victory in the April provincial election signalled a sharp turn away from the former NDP government’s policies.

Kenney killed the provincial carbon tax and vowed to scrap the NDP’s $3.7-billion strategy to lease rail cars to ship more oil out of Alberta, planning to shift these contracts to the private sector.

The UCP pledged to cut the corporate income tax rate by a third. It ditched efforts to transform the province’s electricity sector to a capacity market and eliminated an investor tax credit program during the fall budget.

The new government also adopted an aggressive stance toward Ottawa and oilpatch foes, creating an energy war room and launching a contentious public inquiry into the foreign funding of anti-oilsands groups.

On the federal scene, Justin Trudeau captured a minority government in the October election during a campaign that prominently featured climate issues, and the Liberals didn’t win any seats in Alberta.

Kenney responded by creating a “fair deal” panel to examine issues such as the creation of an Alberta Pension Plan.

“The provincial election validated or legitimized some anger,” says Jim Dewald, dean at the University of Calgary’s Haskayne School of Business.

“And then the federal election said, ‘Well you might feel that way in Alberta, but that’s not how the rest of us feel.’ ”


Jason Kenney greets supporters at the United Conservative Party 2019 election night headquarters in Calgary, AB on Tuesday, April 16, 2019.

Jim Wells/Postmedia

4. WestJet flies into the arms of Onex — The country’s second-largest airline is an Alberta-made business success story, beginning 23 years ago with just three planes and fewer than 250 workers.

It now has 14,000 employees and more than 180 aircraft — and a new owner. In May, a $5-billion friendly takeover offer for WestJet was unveiled by Toronto-based Onex Corp., which plans to take the airline private.

“It is the end of an era,” says Dewald.

Onex, one of the country’s largest private equity players, offered a 67 per cent premium to WestJet’s share price. Onex executives said it has no plans to alter the air carrier’s expansion strategy or shift its headquarters out of Calgary.

Rafi Tahmazian, a senior portfolio manager at Canoe Financial, said Onex can see WestJet’s underlying value, as global air travel is expected to increase in the coming years.

“Onex was leap-frogging ahead of everybody,” he says. “They want this thing to become big and participate in that growth.”

5. Trouble at the regulator — The province’s powerful energy regulator made news for all the wrong reasons this year.

Former chief executive officer Jim Ellis left the organization in late 2018. Controversy soon followed.

Kenney campaigned on reducing lengthy approval times for energy projects within the AER. After firing the regulator’s board in September, he initiated a review of the AER’s mandate and governance.

In October, the province’s auditor general, public interest commissioner and ethics commissioner jointly released damning reports into the International Centre of Regulatory Excellence (ICORE).

The investigations found AER created ICORE to generate revenues by offering training to foreign regulators — outside of its core mandate — and used the AER’s resources. The A-G estimated at least $2.3 million was spent, through out-of-pocket and in-kind AER resources, on the new centre that was not recovered.

A report by public interest commissioner Marianne Ryan concluded Ellis “grossly mismanaged public funds,” as well as public assets in establishing and supporting ICORE.

Ethics commissioner Marguerite Trussler said the main motivation behind ICORE was to create future employment or remuneration for the former CEO.

And in November, the auditor general highlighted improper expenses and financial reporting issues within the regulator.


This Sept. 19, 2011 aerial photo shows a tar sands mine facility near Fort McMurray, in Alberta. A new wave of cold water is about to hit Canada’s much-buffeted oilsands industry but whether the storm will be perfect or another tempest in a teapot is yet to be determined.

Jeff McIntosh /

THE CANADIAN PRESS

6. Trade troubles — China has been a lucrative growth market for Alberta agriculture producers for the past five years.

In March, China decided it wouldn’t accept canola shipments from this country, citing insect contamination in Canadian product — a claim rejected by Ottawa. By June, Canadian beef and pork were also blocked, although this was later rescinded.

The dispute came as tensions between the two countries intensified over Canada’s arrest of Huawei Technologies’ CFO Meng Wanzhou.

Trade problems soon squeezed Alberta farmers. Canola is the province’s largest export to China and 14,000 Alberta farmers sold almost $800 million of product to the country last year.

ATB Financial reports the canola ban pushed Alberta crop exports down by 13 per cent during the first nine months of the year, worth nearly $500 million.

“Trade became political,” says Sandip Lalli, head of the Calgary Chamber of Commerce. “That impacts all business sectors, it doesn’t just impact agriculture.”


Canola fields in full bloom in Alberta on July 23, 2019.

REUTERS/Todd Korol

7. Curtailment commotion — When the Notley government announced late last year it would impose oil production quotas on large petroleum producers on Jan. 1 it marked a dramatic intervention into energy markets.

It also sparked an industry tug-of-war between refiners opposed to the concept and producers who saw it as a necessary evil. The policy was later extended into 2020 by the Kenney government.

Curtailment kept Alberta oil prices from plummeting, but producers also cut capital spending and didn’t move ahead with growth projects.

The province has been lowering curtailment levels and said in November that producers who add incremental crude-by-rail shipments would see those barrels exempted from the limits.


With the Rockies in the distance a pumpjack operates on the prairie east of the Calgary city limits

Ted Rhodes /

jpg

8. Calgary’s tax revolt — The anger of Calgary business owners facing massive property tax increases has been building for years.

It finally erupted in the summer of 2019. Hundreds of business owners rallied at city hall in June to demand council take steps to buffer them from soaring bills caused by the municipal property tax reassessment process.

“You saw CEOs show up, small business owners show up, mid-sized companies show up,” says Lalli. “It was not a comfortable space for anybody.”

The tax revolt was ignited by a plunge in the assessed value of downtown office towers that shifted $250 million in tax revenues onto other commercial property owners.

When bills went out this spring, almost two-thirds of non-residential properties saw double-digit tax increases.

After initially deciding to do nothing to soften the blow in May, the backlash saw council later adopt a $131-million assistance package.

In late November, council passed a 2020 budget that saw more of the tax burden shifted to homeowners.


A sign for Wurst Restaurant in Calgary’s Mission district shows the increase in its property taxes over six years. City businesses have shouldered more of the tax load than homeowners as property values in Calgary’s downtown have fallen.

Dean Pilling /

Postmedia

9. Energy wars — A fight that started in 2018 over the federal government’s new environmental Impact Assessment Act carried over into this year, becoming a potent symbol of the divisions between Alberta and Ottawa.

Industry groups and the Alberta government said the legislation threatened to stop new pipeline projects from being built but the Trudeau government disagreed, passing Bill C-69 before the fall election.

In September, Alberta launched a court challenge to the bill. Other energy scraps erupted, involving the federal moratorium on oil tankers off the northern B.C. coast, and the future of the Trans Mountain pipeline expansion.

After the project’s federal approval was quashed by the courts last year, Ottawa conducted a new round of consultations and gave the Trans Mountain expansion the green light in June. Construction is now underway.


Pipe for the Trans Mountain pipeline is unloaded for construction.

Canadian Press/Jason Franson

10. Unwanted wells and natural gas pains

wells have become a super-sized problem in Alberta since the energy downturn began, and it expanded as natural gas companies struggled this year.

The failure of Houston Oil & Gas Ltd. in November, and Trident Exploration Corp. last spring, tossed potentially thousands of old wells into the hands of the Alberta Orphan Well Association, an industry-funded group that cleans up facilities that no longer have an active owner.

Meanwhile, a key Supreme Court of Canada ruling in January on the case of Redwater Energy Corp. clarified the issue of environmental liabilities and bankruptcy proceedings, supporting the polluter-pay principle.


Abandoned oil well equipment, once owned by now defunct Legal Oil and Gas Ltd., on an Alberta farm.

Supplied /

Postmedia/File

Chris Varcoe is a Calgary Herald columnist.

cvarcoe@postmedia.com

Let’s block ads! (Why?)



Source link

Continue Reading

Economy

China virus outbreak may wallop economy, financial markets – CTV News

Published

on


BANGKOK —
News that a new virus that has afflicted hundreds of people in central China can spread between humans has rattled financial markets and raised concern it might wallop the economy just as it might be regaining momentum.

Health authorities across Asia have been stepping up surveillance and other precautions to prevent a repeat of the disruptions and deaths during the 2003 SARS crisis, which caused $40 billion-$50 billion in losses from reduced travel and spending.

The first cases of what has been identified as a novel coronavirus were linked to a seafood market in Wuhan, suggesting animal-to-human transmission, but it now is also thought to be spread between people. As of Wednesday, some 440 people were confirmed infected and nine had died from the illness, which can cause pneumonia and other severe respiratory symptoms.

A retreat in financial markets on Tuesday was followed by a rebound on Wednesday, as investors snapped up bargains. Share benchmarks were mostly higher, with Hong Kong’s Hang Seng gaining 1.1% and the Shanghai Composite index advancing 0.4%. Japan’s Nikkei 225 jumped 0.7%.

While the new virus appears much less dangerous than SARS, “the most significant Asia risk could lie ahead as the regional peak travel season takes hold, which could multiply the disease diffusion,” said Stephen Innes, chief Asian strategist for AxiCorp. “So, while the risk is returning to the market, the lights might not turn green until we move through the Lunar New Year travel season to better gauge the coronavirus dispersion.”

The 2003 outbreak of Severe Acute Respiratory Syndrome in China, along with cases of a deadly form of bird flu, resulted in widespread quarantine measures in many Chinese cities and in Hong Kong. More than 8,000 people fell sick and just under 800 people died, a mortality rate of under 10%.

While the ordinary flu kills hundreds of thousands of people each year, such new diseases raise alarm due to the uncertainties over how deadly they might be and how they might spread. That’s especially true during the annual mass travel of the Lunar New Year festival, which begins this week.

“The cost to the global economy can be quite staggering in negative GDP terms if this outbreak reaches epidemic proportions as until this week, the market was underestimating the potential of the flu spreading,” Innes said in a report.

In China, health officials stepped up screening for fevers. “We ask the public to avoid crowds and minimize the public gatherings to reduce the possibility of cross infection,” Li Bin, deputy director of the National Health Commission, said Wednesday.

Just as with SARS, though, the impact of the disease is likely to fall heaviest on specific industries, such as hotels and airlines, railways, casinos and other leisure businesses and retailers, analysts said. Most declined Tuesday but rebounded on Wednesday as investors locked in profits ahead of the Lunar New Year holiday. The outbreak is a boon, meanwhile, for pharmaceutical companies and makers of protective masks and other medical gear.

“If the pneumonia couldn’t be contained in the short term, we expect China’s retail sales, tourism, hotel & catering, travel activities likely to be hit, especially in the first and second quarters,” said Ning Zhang of UBS. Government efforts to offset the shock would help, but growth will likely rebound less than earlier forecast, Zhang said.

As of Jan. 17, the World Health Organization had not recommended any international restrictions on travel but urged local authorities to work with the travel industry to help prevent the disease from spreading while warning travellers who fall ill to seek medical attention.

The illness is yet another blow for Hong Kong, whose economy is reeling from months of often violent anti-government protests. The wider concern is China, where the economy grew at a 30-year low 6.1% annual pace in 2019. An interim trade pact between Beijing and Washington had raised hopes that some pressure from tensions between the two biggest economies might ease, and the latest data have showed signs of improved demand for exports.

The virus outbreak raises the risk such optimism might be premature.

“According to our analysis of the spread of the SARS virus, which so far appears very similar to 2019-nCoV (the new virus), we expect increased downward pressure on China’s growth, particularly in the services sector,” Ting Lu and other analysts at Nomura in Hong Kong said in a commentary.

The growing number of global travellers has contributed to the spread of various diseases in recent years, including Middle East respiratory syndrome, the Ebola and Zika viruses, the plague, measles and other highly contagious illnesses.

The World Economic Forum estimates that pandemics — cross-border outbreaks like the flu that killed 50 million people a century ago — have the potential to cause an $570 billion in annual economic losses.

The 2014-16 Ebola virus epidemic caused losses amounting to over $2.2 billion, according to the World Bank. That includes a 40% decrease in the number of working Liberians at the height of the crisis, lower exports and harvests, and costs for combating the disease.

Apart from the human tragedy, such crises gobble up resources needed for other government spending, exacting a harsh toll on the poorest economies. In Africa, the loss of health care workers to Ebola resulted in thousands more deaths of mothers and babies, hindered work on other diseases such as preventing and treating malaria, HIV/AIDS and tuberculosis, reduced vaccination rates and fewer surgeries, the World Bank said in a report.

Many survivors, meanwhile, suffer from lingering effects of the illnesses and the powerful drugs used to save their lives, becoming more vulnerable to hunger and other risks.

At the same time, increasingly sophisticated tools for collecting data and analyzing are aiding efforts to prepare for and cope with severe disease outbreaks.

In 2016, the World Bank set up a $500 million rapid response insurance fund, working with the WHO and insurance companies, to combat pandemics in developing countries. The fund uses “cat bonds,” or catastrophe bonds, whose principal will be lost if the funds are needed to help deal with an outbreak. Private insurers have followed with products of their own meant to hedge against risks from such disasters.

Let’s block ads! (Why?)



Source link

Continue Reading

Economy

South Korea's economy grew at decade-low pace in 2019 – Aljazeera.com

Published

on


Sagging exports and global trade tensions pulled South Korea’s annual growth rate last year to its lowest level since 2009, but a surge in government spending may have given the economy a boost in the last three months of 2019.

The slowdown comes as President Moon Jae-in’s administration increases fiscal spending and as the Bank of Korea (BOK) considers further stimulus to shield the economy from a global slowdown.

More:

The gross domestic product (GDP) increased by a seasonally adjusted 1.2 percent in the fourth quarter of 2019 compared with the previous three months, the BOK said on Wednesday.

It was the fastest expansion since the third quarter of 2017 and outperformed the median estimate of 0.8 percent in a survey by Reuters news agency.

“Government spending definitely was a boost as exports was a drag,” said Park Chong-hoon, an economist at Standard Chartered Bank in Seoul. “The prospect for exports is better this year with the US-China signing of the trade deal, and as China continues with its expansionary fiscal policies.”

Robust government spending on public infrastructure combined with better private consumption improved growth in the fourth quarter, but that did little to help exports, which made no contribution to the 1.2 percent expansion.

In the fourth quarter, private consumption increased 0.7 percent from three months earlier while construction investment jumped 6.3 percent.

Exports declined 0.1 percent in volume terms, reflecting the extended slump in shipments, which declined for a 13th consecutive month through December in year-on-year terms.

For the whole of 2019, the economy grew by 2 percent, the slowest pace in 10 years and matching the central bank’s projection.

“Of the 2 percent, the net government contribution to growth came to 1.5 percentage points, the biggest portion since 2009 but that didn’t change the fact that it was a hard year for Korea in terms of exports,” a central bank official said.

In a press briefing held after the GDP data release, another BOK official said the outbreak of a virus from central China has emerged as a fresh risk that could hurt consumer spending.

“With the case of the Middle East Respiratory Syndrome (MERS), people didn’t go out much and travelled less, so spreading of the new virus may shrink consumption in that regard,” Park Yang-su, a director general at the BOK, said in response to a question about the virus.

South Korea in 2015 drew up a supplementary budget to help the economy cope with the effects of the outbreak of the MERS.

The virus in China, originating in the central city of Wuhan at the end of last year, has spread to Beijing, Shanghai and elsewhere, with cases also confirmed in the United States, Thailand, South Korea, Japan and Taiwan.

Nine deaths and 440 cases had been reported as at Wednesday morning in Asia.

SOURCE:
Reuters news agency

Let’s block ads! (Why?)



Source link

Continue Reading

Economy

Quebec can develop its economy and fight climate change, Legault says – Montreal Gazette

Published

on


Thunberg or Trump? Premier skates around question about whom he sides with as he heads off to economic summit in Davos.

QUEBEC — Don’t ask Premier François Legault to choose which climate change vision he believes in — the one backed by Greta Thunberg’s or that of U.S. President Donald Trump?

He’d rather not take sides.

Moments before taking a flight Tuesday to Davos, Switzerland — where Thunberg and Trump are already sparring over climate change at the World Economic Summit — Legault said he sees Quebec as somewhere in the middle of the kerfuffle.

“I am in the balanced clan,” Legault told reporters when asked whom he prefers. “I think we need to be able to create wealth in Quebec because we have some catching up to do, but we must make more effort to reduce our greenhouse gas emissions.

“I think we have to find a balance.”

The Coalition Avenir Québec was criticized during the 2018 election campaign for barely mentioning the environment and climate change. On Tuesday, Legault said industrialized countries like the United States and Asia must do more to save the planet.

Legault made the remarks just hours before heading to Davos. Quebec premiers have attended the summit for the last 30 years in an attempt to stimulate foreign investment in the province.

Legault’s economic pledge during the election campaign was to double private investment in Quebec. In a statement released after his departure Tuesday, Legault said he wants to make Quebec “the best place in the world to invest.”

The theme of the conference is Stakeholders for a Cohesive and Sustainable World.

Thunberg and Trump are already there, both making waves in their own manner.


Swedish climate change activist Greta Thunberg leaves the stage during a session at the 50th World Economic Forum annual meeting in Davos, Switzerland.

DENIS BALIBOUSE /

REUTERS

In her remarks to the world’s business elite, Thunberg accused those gathered of being all talk, no action on climate change.

Her remarks contrasted with those of Trump. He used his speech to tout the benefits of soaring American oil and gas production and make a thinly veiled attack on those who warn about looming environmental catastrophe.

Legault will be at the summit until Jan. 24.

pauthier@postmedia.com

twitter.com/philipauthier

Let’s block ads! (Why?)



Source link

Continue Reading

Trending