High oil prices help reduce Alberta’s forecast deficit by $10.5B, according to Q1 fiscal update

Higher-than-expected oil prices have Alberta forecasting a $7.8 billion deficit at the end of the 2021-22 fiscal year, $10.5 billion lower than anticipated in the February budget. 

The figures are contained in the first-quarter fiscal update, released Tuesday by Finance Minister Travis Toews.

The Q1 report reviews Alberta’s financial performance in April, May and June of 2021, and looks at where the province believes its finances will be on March 31, 2022. 

Resource revenue is forecast at $9.8 billion, $6.9 billion higher than Budget 2021. The price for a barrel of West Texas Intermediate, the benchmark used in Alberta forecasts, averaged $65 US over that period, an increase of $19 from the budget estimate.

Although the sudden oil price increase is good news for Alberta’s finances, the report carries this warning: “The rate of change in the economic outlook and government revenue once again displays the volatility faced by Alberta, the need for economic diversification, and for caution in fiscal planning.”

Burden on taxpayers

Not everything is rosy. Taxpayer-supported debt is expected to continue to increase to $105.7 billion — $12.7 billion more than last year but $4.9 billion lower than forecast in the February budget. 

While there are signs of an economic recovery, the forecast says little about the potential economic impact of the fourth wave of COVID-19 beyond noting that the risk of “the spread of more contagious variants” remains. 

In a news conference, Toews said while the current surge in cases will have a “bumpy” fiscal effect, the province’s economy has been “resilient” throughout the earlier waves. 

“I think we’ve taken a very cautious, prudent perspective in terms of revenue projections and it’s one that includes the expectation that we’ll continue to battle the pandemic for weeks and even months ahead,” he said. 

Recovery in industries that were adversely affected by health restrictions — like accommodation, food services and recreation — is not expected until 2022. 

Alberta remains the only Canadian province without a provincial sales tax.

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