Alberta budget deficit forecast remains $6.4B in 2Q fiscal update

Alberta projects its deficit to hold steady at $6.4 billion from last quarter, with the biggest hit coming from lower non-renewable resource revenues.

Alberta’s forecast budget deficit is staying the same as it was three months ago, the government’s finance minister said Thursday as he delivered its second-quarter fiscal update.

The $6.4-billion deficit is a slight, $40-million improvement from August’s first-quarter update and is $1.2-billion more than originally forecast, chiefly due to lower revenues from non-renewable resources, the province said in its mid-year fiscal update on Thursday.

The province forecasts total revenue at $73 billion, down $1.2 billion from budget projections, and total expenses of $79.4 billion, a $52 million adjustment. The price of oil is forecast at $61.50 per barrel, $6.50 below the budget forecast.

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The price of a barrel of West Texas Intermediate – the North American benchmark for oil – is forecast at $61.50, $6.50 below Alberta’s budget forecast.

The province is expecting lower revenues from several resources – including royalties from bitumen, conventional oil, natural gas and byproducts primarily because of lower oil prices and a stronger Canadian dollar – down $1.4 billion from the annual budget presented in the spring to $15.7 billion.

The province forecasts total revenue at $73 billion, down $1.2 billion from budget projections, and total expenses of $79.4 billion, a $52 million adjustment.

And while Alberta’s real GDP (gross domestic product) growth is projected at 2.1% in 2025 amid relatively high unemployment numbers, Horner said “tough choices do lie ahead” given the 2.5 per cent population growth expected this year, although he wasn’t specific about where any cuts would be applied, saying “to meet these pressures, we must stay disciplined and make every fiscal decision count.”

He pointed to the United Conservative Party government’s efforts to keep spending increases below population growth and inflation.

“We’re going to have to continue to prioritize health care, education, (so) those aren’t places where you’re likely to see it,” he said. “Health’s over their budget, currently, a lot of it’s volume driven, pressures, physician compensation, more surgeries and the like, so I think we’ll have to continue to prioritize from within, and it’ll probably mean continued cannibalization of everything else.”

Alberta is reporting record high oilsands production, but global trends are “expected to keep a lid on demand and prices” for the rest of the fiscal year, budget documents say.

The province has estimated that every dollar drop in the per-barrel WTI price slashes $750 million from Alberta’s treasury.

At the same time, ongoing trade wars with China and the United States continue to weigh down the province’s agriculture, manufacturing and lumber exports.

Alberta’s recent rapid population growth is expected to slow next year. But the province is still under added pressure, having topped five million residents earlier this year.

Recent labour agreements with large public sector unions, including those representing teachers, registered nurses and civil servants, mean the province needs to dip into its contingency fund to the tune of about $881 million.

Of the $4 billion set aside for emergencies, $1.7 billion has been spent.

With files from Lisa Johnson, The Canadian Press