Alberta recession pushes its deficit near $10.9B
Alberta’s economy is headed for the largest two-year contraction on record, as private sector investment continues to fall, by a projected 16 per cent this year, and the government’s deficit balloons to almost $10.9 billion.
“We are keeping government spending in line while protecting families from reckless cuts to vital public services,” Alta. Finance Minister Joe Ceci said Tuesday, delivering the government’s firstquarter fiscal update.
The fiscal update shows the government now expects to borrow $7 billion this year for operating expenses — to keep the lights on at government facilities — which is 31 per cent higher than the $5.4 billion in direct borrowing the province had originally budgeted.
The additional borrowing is partly the result of a draw down from the contingency fund last year, but it’s also from higher-than-budgeted government expenses and spending.
The province is now forecasting $52.3 billion in expenses over the course of 2016, up $1.2 billion from the initial budget.
As a result, the full-year deficit for 2016 will grow to nearly $10.9 billion from a budgeted deficit of roughly $10.4 billion.
The $527 million in additional debt is partly, but not fully, offset by higherthan-budgeted government revenues.
In combination with a handful of other factors, a slight rise in oil prices — to US$45 per barrel from a budgeted US$42 per barrel — will boost government revenues by $708 million, to $42.1 billion.
National Bank Financial managing director and head of public sector research Warren Lovely called the improved oil price forecast “a silver lining” in a research note.
The oil price rout that began two years ago has led to thousands of job losses and has pushed Alberta’s oildependent economy into the worst recession since the government started recording data in the 1980s.
The first quarter, which runs from April to June, was challenging in large part due to the devastating wildfire that raged around Fort McMurray.
The government spent $369 million to fight the fire, which disrupted a total of 40 million barrels of oil production over the course of May and June — affecting royalty payments to the province. It also now budgets $647 million in disaster relief for the fireravaged area.