Alberta's projected deficit drops to $5.8 billion, buoyed largely by global energy price spike

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Alberta's projected deficit drops to $5.8 billion, buoyed largely by global energy price spike
© Provided by Edmonton Journal Finance Minister Travis Toews delivers the 2021 Alberta provincial budget at the Alberta legislature in Edmonton on Feb. 25, 2021.

Alberta’s projected deficit for this fiscal year has dropped again, largely due to a spike in oil prices, even as global markets have slumped over concerns over the Omicron COVID-19 variant.

The latest fiscal update, released Tuesday by Finance Minister Travis Toews, projects a $5.8 billion deficit in 2021-22, $12.4 billion lower than was forecast in the February budget and $2 billion lower than was expected in the last fiscal update in August.

In the next two years, deficits of $3.3 billion and $2.3 billion are forecast, $7.7 billion and $5.7 billion lower than the budget originally estimated.

Taxpayer-supported debt is estimated to reach $101.6 billion by March 31, the last day of the fiscal year. The net debt to GDP ratio is estimated at 19.2 per cent.

Total revenue in 2021-22 is forecast at $57.9 billion, $14.2 billion higher than budget, with over half of the increase from resource revenue, the document says.

Non-renewable resource revenue is forecast at $10.9 billion in 2021-22, $7.8 billion higher than in 2020-21 and $8.1 billion more than estimated in budget 2021 but the document warns that revenue is forecast to drop to $9.9 billion and $9.2 billion over the next two years as energy prices stabilize.

Bitumen royalties make up about 70 per cent of resource revenue, hitting a historic high. Royalties from a forecast of $1.4 billion in the budget, to $7 billion in August, to $7.6 billion in the latest update.

The West Texas Intermediate (WTI) price is forecast at US$70.50 per barrel $24.50 more than was originally expected in the budget and US$5 per barrel more than was projected in August’s update.

The emergence of the Omicron variant has reignited fears of travel restrictions, lockdowns, increased inflation and slower economic growth. Oil prices slid and global stock benchmarks fell Tuesday after a warning from drugmaker Moderna that existing vaccines are unlikely to be as effective against the new variant.

Alberta government officials said Tuesday that they took the new variant into account when making their latest projections and that WTI needs to average $69 a barrel for the rest of the year to hit the forecast.

As of Monday afternoon, WTI sat at US$70.06 a barrel.

The UCP government paints a relatively rosy picture of Alberta’s economic growth, anticipating a 6.7 per cent rise in exports, expanded investment, a drop in the unemployment rate to an average of 8.8 per cent in 2021.

It also expects corporate income tax revenue to increase by an average of 19 per cent over the next two years. increasing to $2.9 billion from a forecast of $2.5 billion in August, $591 million higher than in February’s budget.

As of September, the province spent $814 million in health operating expenses related to COVID-19, including lab testing, vaccine deployment, personal protective equipment and continuing care.

COVID-19 and recovery plan spending is now projected to be $2.8 billion, partially offset by $859 million from a budgeted $1.75 billion COVID-19 and recovery contingency fund. An estimated $336 million from the COVID-19 contingency, and another $96 million for the recovery plan remains unspent.

Prior to the document being released, NDP finance critic Shannon Phillips criticized the government for not doing more to help people with their day-to-day costs as inflation increased the cost of living across the province, pointing to the 2019 decision to de-index income tax so that it is not linked to inflation and similar moves with AISH and other supports.

“Jason Kenney is making Christmas more stressful, and there’s no need for it,” she said Monday.

The next fiscal update is slated for February 2022 when the government releases the next budget.

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