Province of Alberta€¦ · 2014 2015 2016 2017f 2018f (%) Emerging Markets Advanced Economies Global Real GDP Growth. Interest rates rising slowly 4 Central Bank policy target rates,

Province of Alberta Fort McMurray

Investor Meetings

September, 2017

Catherine Rothrock Chief Economist & Executive Director,

Treasury Board and Finance

and

Tim Pierce Director Financing

Capital Markets, Treasury Board and Finance

Road to Recovery

• Nearly all sectors of Alberta economy rebounding

• Return to growth in 2017

– Exports, reconstruction in Fort McMurray, public infrastructure

• A moderate recovery

– Lingering effects of downturn on corporate profits and household

incomes

– Full recovery in real GDP expected in 2019

2

Global growth picking up

3

Annual Real GDP Growth

Sources: International Monetary Fund and Alberta Treasury Board and Finance calculations

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2014 2015 2016 2017f 2018f

(%) Emerging Markets

Advanced Economies

Global Real GDP Growth

Interest rates rising slowly

4

Central Bank policy target rates, monthly

Source: Haver Analytics

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

(%)

US Canada

Households driving Canadian growth…

5

Contributions to quarter-over-quarter annualized growth

in Canadian Real GDP by Expenditure

Source: Statistics Canada

-8

-6

-4

-2

0

2

4

6

8

10

Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2014 2015 2016 2017

(Percentage Points) Household Consumption GovernmentInventories Residential StructuresNon-Residential Investment Net ExportsReal GDP

…and energy sector no longer a drag

6

Contributions to quarter-over-quarter annualized growth

in Canadian Real GDP by Industry


-0.6-0.4-0.20.00.20.40.60.81.01.21.4

(%) Non-energy Other EnergySupport activities for Mining and OAG Non-conventionalConventional

Energy

Will recent strength in Canadian dollar

continue?

7

Canadian and US exchange rate

Source: US Federal Reserve Bank, Bank of Canada

65

70

75

80

85

90

95

100

Sep-13 Sep-14 Sep-15 Sep-16 Sep-17

(US cents/CA$) Canadian dollar exchange rate

July 15th, 2015

Bank of Canada cuts

overnight rate to 0.50%

January 21st, 2015

Bank of Canada cuts overnight

rate to 0.75%

Federal Reserve rate increases December 16th, 2015 0.25-0.50% December 14th, 2016 0.50-0.75% March 15th, 2017 0.75-1.00% June 14th, 2017 1.00-1.25%

Bank of Canada rate increases July 12th, 2017 0.50-0.75%

September 6th, 2017 0.75-1.00%

Muted outlook for oil prices

8

West Texas Intermediate

Sources: Alberta Energy, Alberta Treasury Board and Finance, Q1 2017

0

20

40

60

80

100

120

Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18f Jan-19f Jan-20f

(US$/bbl)

Broad-based recovery in activity

9

Contribution to year-over-year change in the Alberta

Activity Index

Source: Statistics Canada and Alberta Treasury Board and Finance

-8

-6

-4

-2

0

2

4

6

8

10

12

(Percentage Points)

EnergyGeneral Business ActivityHousehold ActivityLabour MarketAlberta Activity Index

Energy drives exports

10

Year-over-year growth in Alberta exports


-60

-40

-20

0

20

40

60

80

100

(%) Total Exports

Energy Exports

Exports ex. Energy

Solid drilling activity

050

100150200250300350400450500

(Rigs Drilling)

Range 2010-2014201520162017

11

Number of Alberta active

rigs drilling

Source: Canadian Association of Oilwell Drilling

Contractors (CAODC)

Total number of metres

drilled

Source: Alberta Energy Regulator

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

2,000,000

(Metres) Range 2010-2014201520162017

Energy investment stabilizing, production

continue to grow

12

Alberta Energy Investment and Oil Production

Source: Statistics Canada and Alberta Treasury Board and Finance; e-estimate, f-forecast

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

0

10

20

30

40

50

60

70

(Mbpd) ($billion) Oil Sands Investment (Left)

Conventional Oil and Gas Investment (Left)

Production (Right)

Private sector spending drags construction

activity

13

Non-residential building construction investment

Sources: Statistics Canada

-20

-15

-10

-5

0

5

10

15

20

Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2

2013 2014 2015 2016 2017

(y/y % change) Industrial buildings

Commercial buildings

Institutional & governmental buildings

Growth in non-residential investment

Estimated wildfire impact on Alberta

indicators

14

Source: Alberta Treasury Board and Finance

-1.5

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

Real GDPGrowth

EmploymentGrowth

Real ExportGrowth

(%)

2016 2017 2018

Fort McMurray rebuilding supports

housing activity

15

Fort McMurray housing starts as % of Alberta

0

2

4

6

8

10

12

14

0

50

100

150

200

250

300

350

(%) (units)

Housing Starts (Left)

% of Provincial Total (Right)

Natural increases and immigration drive

population gains

16

Change in the Alberta population by component

Sources: Statistics Canada and Alberta Treasury Board and Finance Budget 2017, f-forecast

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

-20

0

20

40

60

80

100

120

140

(%) (Thousands) Natural Increase (Left) Net International (Left)

Net Interprovincial (Left) Population Growth (Right)

Labour market re-balancing

17

Composition of employment change since July 2016 low*

Sources: Statistics Canada

*Employment change between July 2016 and Aug 2017

-20

0

20

40

60

(Thousands)

Gradual recovery in labour market

18

Alberta Labour Market Indicators

Source: Statistics Canada and Alberta Treasury Board & Finance, f-forecast

0

1

2

3

4

5

6

7

8

9

2010 2011 2012 2013 2014 2015 2016 2017f 2018f 2019f 2020f

1,500

1,700

1,900

2,100

2,300

2,500

(%) (000s)

Employment (Left) Unemployment Rate (Right)

Service sector leads earnings recovery

19

Alberta average weekly earnings


-6

-4

-2

0

2

4

6

8

10

Jun-14 Oct-14 Feb-15 Jun-15 Oct-15 Feb-16 Jun-16 Oct-16 Feb-17 Jun-17

(y/y % change) Total Goods sector

Service sector

Housing sector holding up

20

Annualized Alberta housing start & existing home sales*

Source: Canadian Real Estate Association, Canada Mortgage and Housing Corporation

*3-month moving average

20

25

30

35

40

45

50

55

60

65

Aug-15 Nov-15 Feb-16 May-16 Aug-16 Nov-16 Feb-17 May-17 Aug-17

(Thousands) Housing starts Existing home sales

Fiscal assumptions

Actual Q1 fiscal

Update Budget 2017

Fiscal Year (Apr- Mar 31) 2015-16 2016-17 2017-18 2017-18 2018-19 2019-20

WTI Oil (US$/bbl) 45 48 49 55 59 68

Light-Heavy Differential

(US$/bbl) 13.40 13.93 12.20 16.00 18.00 18.60

Natural Gas (CDN$/GJ) 2.21 2.01 2.60 2.90 2.90 3.00

Exchange Rate (US/CDN$) 76.3 76.2 77.0 76.0 77.5 78.0

2016 Calendar year 2017 Calendar year 2018 Calendar year

Calendar year

Q1 fiscal

Update Budget

Q1 fiscal

Update Budget

Q1 fiscal

Update Budget

Real GDP Growth (%) -3.5 -2.8 3.1 2.6 2.3 2.2

Employment Growth (%) -1.6 -1.6 1.3 0.9 1.6 1.4

Unemployment Rate (%) 8.1 8.1 7.8 8.0 7.3 7.6

21

Source: Alberta Treasury Board & Finance

Financing requirements

Direct and Indirect

22

Borrowing Requirements

(1) Includes new and re-financing of maturing term debt. Includes amounts borrowed on behalf of

the Balancing Pool; $833 million in 2018-19; $699 million in 2019-20.

2017-18 Borrowing

($ billions) Agencies(1) Capital

Refinancing

& Fiscal

2017-18

Forecast 6.2 5.0 4.9

2018-19

Target 4.4 5.8 8.4

2019-20

Target 2.7 6.1 10.3

0

2

4

6

8

10

12

14

16

18

(Bill

ion

s)

Expected

GBP Issued

USD Issued

CAD Issued

Borrowing Platform

Increasing Global Access and Liquidity

23

Target issuance

60% -

70%

30% -

40%

Domestic

International

Domestic borrowing

• Maintain larger domestic benchmark sized

issues ($3-$5B)

• Monitor secondary market liquidity

• Infrequent domestic MTN issuance

Foreign borrowing

• Liquid US$ Global Issues

– SEC Registered, large US$ benchmarks

• US$ CP program launched

• Sterling and Euro Benchmarks in 2017-18

• MTN and structured issues in other

currencies, including under the new AUD

program as opportunities arise

Financial management

Maturity profile & liquidity(1)

$-

$1.0

$2.0

$3.0

$4.0

$5.0

$6.0

(Bill

ion

s)

Issued by Alberta Current Benchmarks

24

(1) As of September 8, 2017. Excludes Money Market amounts.

Annual and Quarterly Economic Outlook

Publications http://www.finance.alberta.ca/aboutalberta/economic_outlook.html

Our Weekly and Monthly Economics

Publications http://www.finance.alberta.ca/aboutalberta/economic_outlook.html

Sign up for our Publications http://www.finance.alberta.ca/subscribe/edps/

Documents

Province of Alberta€¦ · 2014 2015 2016 2017f 2018f (%) Emerging Markets Advanced Economies Global Real GDP Growth. Interest rates rising slowly 4 Central Bank policy target rates,