Alberta’s budget outlook for this year is turning a rosier shade of red ink with jobs up, the deficit down and oil and gas prices humming along at unexpectedly high levels.
Finance Minister Travis Toews says the deficit is expected to be $5.8 billion when the government closes the books on the 2021 fiscal year on March 31.
That’s a third of the $18.2-billion deficit he predicted when he tabled the budget back in February.
“Our economic recovery is becoming more entrenched,” Toews told reporters Tuesday as he delivered the mid-term budget update.
“Almost all of Alberta’s revenue sources are improving, along with the economy.”
Alberta’s economic arrows are pointing up across the board propelled by a resource-driven economy sailing higher than expected as the global economy emerges from the COVID-19 pandemic.
Revenue from non-renewable resources is expected to be almost $11 billion, an $8-billion leap from what was first projected.
The government said Alberta’s oil production reached 3.5 million barrels per day in September, a nine per cent rise, helping offset slower growth in other areas such as tourism.
Oil is also benefiting from a natural gas crunch in Europe, which is seeing customers switch over to oil for the winter given the spike in natural gas prices.
“Global petroleum demand has outstripped supply, underpinned by a solid pickup in global economy and ongoing output restraint by OPEC (the Organization of the Petroleum Exporting Countries),” said the mid-term report.
Alberta originally forecast the price of West Texas Intermediate — the benchmark price for North American oil — at US$46 a barrel this year. It has since been revising that figure upwards and is now predicting it will average US$70.50.
Natural gas revenues are pegged to bring in almost $1.6 billion, triple what was projected in February, due to the rebound in the global economy and to the accelerated switch away from greenhouse gas-intensive energy sources like coal.
However, Toews said caution is needed given that today’s soaring price peak can quickly be followed by a dizzying plunge.
“Oil prices are volatile, as we see today, and major fluctuations can be difficult to predict. It’s a story Albertans have been living for decades but one most acutely lived in recent years,” said Toews, referring to when oil prices free-fell into negative territory as COVID-19 all but shuttered the global economy in early 2020.
Among other highlights, the report predicts Alberta’s real gross domestic product, a composite indicator of economic output, is expected to grow by 6.1 per cent, up from 4.8 per cent at budget.
Total revenue is expected to be almost $58 billion, about $14 billion more than projected.
Total expenses are approaching $64 billion, about $2 billion more, due mainly to COVID-19 expenses and drought relief.
The unemployment rate is forecast at almost nine per cent, down from about 11 per cent in 2021, and it is expected to keep dropping to under six per cent by 2024.
Personal and corporate income taxes are pegged to reach almost $16 billion, about $2.5 billion higher from budget.
Taxpayer-supported debt is also falling and is expected to be almost $102 billion by spring.
The Opposition NDP has said while the price rise helps Alberta, Toews needs to implement a plan to help Alberta families caught in the pincer-grip of sharply rising inflation and hikes in fees and costs under the United Conservative government.