Canadian economic growth will snap back after a second-quarter contraction and will get further lift in 2017 from rising energy prices, low interest rates, and federal stimulus, according to the Economic Outlook report released today by RBC Economics.

Canadian GDP growth is expected to accelerate to 1.8% in 2017, up from 1.3%in 2016. The RBC forecast calls for real GDP growth of 3.7% (annualized) in the third quarter of 2016 as rebuilding takes place in Alberta, followed by a slower 1.9% gain in the fourth quarter.

“The Alberta wildfires and sharp pullback in oil sands production in May took the Canadian economy on a brief detour into negative growth,” said Craig Wright, senior VP and chief economist at RBC. “Yet the recovery should spur a similarly sharp rebound in growth in the latter half of this year and we anticipate that momentum will carry over into next year.”

RBC expects the economies of Alberta, Saskatchewan, and Newfoundland and Labrador to contract further this year as the oil-producing provinces continue to struggle with low revenue and private-sector restraint, according to RBC. Some of the recent weakness in Alberta from the wildfires in Fort McMurray should start to reverse in the second half of 2016.

All other provinces except New Brunswick are expected to continue to expand in 2016, albeit at varying paces.

“Momentum appeared to slow this spring in several oil-consuming provinces, including Ontario, Quebec and Manitoba, and we lowered our 2016 growth forecasts for eight provinces,” Wright said. “Our 2017 outlook shows more balanced growth across the country, with Alberta and Saskatchewan returning to positive growth and economic activity moderating in British Columbia.”

Worries about the state of household balance sheets are being tempered by the ongoing reduction in labor market slack, the report stated in comments on the labor market. While the pace of employment gains slowed in the year to August, job cuts in the oil-producing provinces were partly responsible.

Also at play are demographic factors that are reducing the pace of growth of the working-age population and commensurately lowering the number of positions that need to be created to absorb unemployed workers. Despite the slowing in the average pace of job creation, the report expects Canada’s unemployment rate to hold at around 7%, just slightly above its estimated full-employment level.