Province of Alberta Fort McMurray Investor Meetings September, 217 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 217 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 219 2
Global growth picking up Annual Real GDP Growth (%) Emerging Markets 4. Advanced Economies Global Real GDP Growth 3.5 3. 2.5 2. 1.5 1..5. 214 215 216 217f 218f Sources: International Monetary Fund and Alberta Treasury Board and Finance calculations 3
Interest rates rising slowly Central Bank policy target rates, monthly (%) 5. 4.5 4. 3.5 3. 2.5 2. 1.5 1..5. US Canada Source: Haver Analytics 4
Households driving Canadian growth Contributions to quarter-over-quarter annualized growth in Canadian Real GDP by Expenditure (Percentage Points) Household Consumption Government Inventories Residential Structures 1 Non-Residential Investment Net Exports 8 Real GDP 6 4 2-2 -4-6 -8 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Source: Statistics Canada 214 215 216 217 5
and energy sector no longer a drag Contributions to quarter-over-quarter annualized growth in Canadian Real GDP by Industry (%) Non-energy Other Energy 1.4 Support activities for Mining and OAG Non-conventional 1.2 Conventional 1..8.6.4.2. -.2 -.4 -.6 Energy Source: Statistics Canada 6
Will recent strength in Canadian dollar continue? Canadian and US exchange rate (US cents/ca$) 1 95 January 21 st, 215 Bank of Canada cuts overnight rate to.75% Canadian dollar exchange rate July 15 th, 215 Bank of Canada cuts overnight rate to.5% Bank of Canada rate increases July 12 th, 217.5-.75% September 6 th, 217.75-1.% 9 85 8 Federal Reserve rate increases December 16 th, 215.25-.5% December 14 th, 216.5-.75% March 15th, 217.75-1.% June 14th, 217 1.-1.25% 75 7 65 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Source: US Federal Reserve Bank, Bank of Canada 7
Muted outlook for oil prices West Texas Intermediate (US$/bbl) 12 1 8 6 4 2 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18f Jan-19f Jan-2f Sources: Alberta Energy, Alberta Treasury Board and Finance, Q1 217 8
Broad-based recovery in activity Contribution to year-over-year change in the Alberta Activity Index (Percentage Points) 12 1 8 6 4 2-2 -4-6 -8 Energy General Business Activity Household Activity Labour Market Alberta Activity Index Source: Statistics Canada and Alberta Treasury Board and Finance 9
Energy drives exports Year-over-year growth in Alberta exports (%) 1 8 6 4 2-2 -4-6 Total Exports Energy Exports Exports ex. Energy Source: Statistics Canada 1
Solid drilling activity Number of Alberta active rigs drilling Total number of metres drilled (Rigs Drilling) 5 45 4 35 3 25 2 15 1 5 Range 21-214 215 216 217 (Metres) Range 21-214 215 2,, 216 1,8, 217 1,6, 1,4, 1,2, 1,, 8, 6, 4, 2, Source: Canadian Association of Oilwell Drilling Contractors (CAODC) Source: Alberta Energy Regulator 11
Energy investment stabilizing, production continue to grow Alberta Energy Investment and Oil Production ($billion) 7 6 5 4 3 2 1 Oil Sands Investment (Left) Conventional Oil and Gas Investment (Left) Production (Right) (Mbpd) 4, 3,5 3, 2,5 2, 1,5 1, 5 Source: Statistics Canada and Alberta Treasury Board and Finance; e-estimate, f-forecast 12
Private sector spending drags construction activity Non-residential building construction investment (y/y % change) 2 15 1 5-5 -1-15 -2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 213 214 215 216 217 Sources: Statistics Canada Industrial buildings Commercial buildings Institutional & governmental buildings Growth in non-residential investment 13
Estimated wildfire impact on Alberta indicators (%) 2. 216 217 218 1.5 1..5. -.5-1. -1.5 Real GDP Growth Employment Growth Real Export Growth Source: Alberta Treasury Board and Finance 14
Fort McMurray rebuilding supports housing activity Fort McMurray housing starts as % of Alberta (units) 35 3 25 2 15 1 5 Housing Starts (Left) % of Provincial Total (Right) (%) 14 12 1 8 6 4 2 15
Natural increases and immigration drive population gains Change in the Alberta population by component (Thousands) Natural Increase (Left) Net International (Left) 14 Net Interprovincial (Left) Population Growth (Right) 12 1 8 6 4 2-2 (%) 3.5 3. 2.5 2. 1.5 1..5. -.5 Sources: Statistics Canada and Alberta Treasury Board and Finance Budget 217, f-forecast 16
Labour market re-balancing Composition of employment change since July 216 low* (Thousands) 6 4 2-2 Sources: Statistics Canada *Employment change between July 216 and Aug 217 17
Gradual recovery in labour market Alberta Labour Market Indicators (s) 2,5 2,3 2,1 1,9 1,7 1,5 Employment (Left) Unemployment Rate (Right) 21 211 212 213 214 215 216 217f 218f 219f 22f (%) 9 8 7 6 5 4 3 2 1 Source: Statistics Canada and Alberta Treasury Board & Finance, f-forecast 18
Service sector leads earnings recovery Alberta average weekly earnings (y/y % change) Total Goods sector 1 Service sector 8 6 4 2-2 -4-6 Jun-14 Oct-14 Feb-15 Jun-15 Oct-15 Feb-16 Jun-16 Oct-16 Feb-17 Jun-17 Source: Statistics Canada 19
Housing sector holding up Annualized Alberta housing start & existing home sales* (Thousands) 65 6 55 5 45 4 35 3 25 Housing starts Existing home sales 2 Aug-15 Nov-15 Feb-16 May-16 Aug-16 Nov-16 Feb-17 May-17 Aug-17 Source: Canadian Real Estate Association, Canada Mortgage and Housing Corporation *3-month moving average 2
Fiscal assumptions Actual Q1 fiscal Update Budget 217 Fiscal Year (Apr- Mar 31) 215-16 216-17 217-18 217-18 218-19 219-2 WTI Oil (US$/bbl) 45 48 49 55 59 68 Light-Heavy Differential (US$/bbl) 13.4 13.93 12.2 16. 18. 18.6 Natural Gas (CDN$/GJ) 2.21 2.1 2.6 2.9 2.9 3. Exchange Rate (US/CDN$) 76.3 76.2 77. 76. 77.5 78. 216 Calendar year 217 Calendar year 218 Calendar year Q1 fiscal Q1 fiscal Q1 fiscal Budget Budget Budget Calendar year Update Update Update Real GDP Growth (%) -3.5-2.8 3.1 2.6 2.3 2.2 Employment Growth (%) -1.6-1.6 1.3.9 1.6 1.4 Unemployment Rate (%) 8.1 8.1 7.8 8. 7.3 7.6 Source: Alberta Treasury Board & Finance 21
(Billions) Financing requirements Direct and Indirect Borrowing Requirements 217-18 Borrowing ($ billions) Agencies (1) Capital 217-18 Forecast 218-19 Target 219-2 Target Refinancing & Fiscal 6.2 5. 4.9 4.4 5.8 8.4 2.7 6.1 1.3 18 16 14 12 1 8 6 4 2 Expected GBP Issued USD Issued CAD Issued (1) Includes new and re-financing of maturing term debt. Includes amounts borrowed on behalf of the Balancing Pool; $833 million in 218-19; $699 million in 219-2. 22
Borrowing Platform Increasing Global Access and Liquidity Target issuance 6% - 7% Domestic International 3% - 4% 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 217-18 MTN and structured issues in other currencies, including under the new AUD program as opportunities arise 23
(Billions) Financial management Maturity profile & liquidity(1) $6. $5. $4. $3. $2. $1. $- Issued by Alberta Current Benchmarks (1) As of September 8, 217. Excludes Money Market amounts. 24
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