Overview

Economic dogma is full of "truths" that many of us accept unconditionally. But, as we move through the pandemic, some of our old ways of thinking about the economy need to be challenged. Todd Hirsch, vice-president and chief economist at ATB Financial explores five economic “truths” to unlearn and what this means for Alberta in the second half of 2021 and beyond.

Five economic truths to unlearn  

1. ‘Growing the GDP is always good.’ 

“This is a trap that economists, policy makers and politicians fall into all the time,” says Hirsch. However, society should focus not just on the rate of growth of the economy, but also on its direction and its quality.

2. ‘We need to diversify Alberta’s economy.’

“It’s not just about diversity—it’s also stability and prosperity we should be seeking,” says Hirsch. “Alberta is no more or less diversified than other provinces. The challenge for Alberta, is that our dominant industry, the energy industry, is prone to more volatility than other provinces. It’s the nature of our industry that puts us on this rollercoaster.”

3. ‘Grow the economy by lowering taxes.’ 

“I would suggest that in the 21st century there is a growing list of things to think about besides lowering taxes to grow the economy,” says Hirsch. For example, reputation and quality of life—including culture, art, recreation and sport. “That is going to attract people, especially young people, to the region.” 

Education—kindergarten to Grade 12, post-secondary, early childhood education and daycare —is also very important, as are transportation systems, including digital transportation and high-speed connectivity. 

4. ‘We need to balance the environment and the economy.’ 

“Rather than ‘balance,’ the word we should be using is ‘harmony,’” Hirsch says. “When things are in harmony, what we do for the one is beneficial and augments the other.”

5. ‘Free trade is always beneficial.’ 

“Around the world, we are seeing resistance to global trade deals. Canada can no longer count on more trade deals with global partners to lift our economic boat,” Hirsch asserts. “We have to look more at domestic markets, rather than simply relying on trying to export more globally.”

Economic outlook

“Even though the situation has been tough with the COVID-19 pandemic, there is some optimism as well,” says Hirsch. 

ATB’s most recent forecast for the Alberta economy calls for real GDP growth of 4.1% in 2021. However, Hirsch cautions, “Even if we do see this rate of growth, it will probably only get us halfway out of hole we dug in 2020, which saw a contraction of 7% to 8%.” He thinks it may take until 2023 until the economy returns to its pre-COVID-19 size.

Hirsch describes the energy sector as “stable, strong and more efficient.” However, “this is unlikely to result in a lot of growth, especially employment growth.” 

He is upbeat about the prospects for Alberta’s tech and digital sectors, which he thinks will see “lots of opportunities” in 2021 and beyond.

Agriculture and agri-foods are starting to see more diversity, with newer crops like cannabis and pulses. And Alberta’s renewable energy industry offers tremendous potential.

“Overall, it’s a pretty positive picture, considering what we’ve come through and are still living through with this pandemic,” Hirsch says. “We see brighter days in the second half of 2021 and into 2022.”