CALGARY -- The situation hasn't changed for Alberta following the UCP government's third budget but a company that records credit ratings says the framework released Thursday fails to provide a plan to return to balance.

DBRS Morningstar, a global credit ratings business, released a full report on the government of Alberta's 2021 budget on Friday. The province had announced an $18.2 billion deficit, chiefly as a result of pandemic spending and the continued low price of oil.

However, the company says the UCP's budget is rife with "considerable risks" including the success of the provincial COVID-19 vaccination program, changes to commodity prices and the ability for Alberta to keep its spending in check.

"Alberta's economy was severely impacted by the dual shock of the coronavirus pandemic and the significant decline in oil prices in 2020. Real GDP is estimated to have contracted by 7.8 per cent in 2020 and nominal GDP by 12.8 per cent," the report reads. "For 2021, the province estimates that real economic growth will rebound to 4.8 per cent, with growth ranging between 3.1 per cent and 3.7 per cent in the following three years."

The organization says once vaccines become more widely available and temporary pandemic spending subsides, the deficit is expected to shrink and Alberta's outlook could improve.

"The improving outlook is predicated on widespread vaccine rollout and containment of the coronavirus in the latter half of the year. This is expected to support a gradual recovery in oil demand, along with prices and production."

Despite that, DBRS says employment is not expected to return to pre-pandemic levels until at least 2022 and the unemployment rate will remain elevated – estimated to be 9.9 per cent in 2021 and 6.3 per cent by 2024.


The oil and gas sector is estimated to rebound in 2021, DBRS says, especially because of the factors mentioned earlier. However, it will still be "well below peak levels" recorded in 2014.

"This outlook is predicated on improving market access with the Enbridge Line 3 replacement expected to be completed in late 2021 and the Trans Mountain expansion in late 2022."

However, several factors that weigh on Alberta's economic recovery are outside the province's control.

These consist of political and regulatory uncertainty, different levels of government striking a balance between resource development and environmental targets and ongoing challenges to pipeline construction.

DBRS also says the "outlook for debt has not changed materially" from estimates released last November.

"Net debt is projected to reach $82.2 billion in 2021–22, up from $62.5 billion in 2020–21," it wrote in a release. "As recently as 2015–16, Alberta was in a net asset position, but net debt is projected to reach 25 per cent of GDP, marking a significant deterioration in just six years. By 2023–24, net debt is expected to be 27 per cent and the government has committed to keep net debt below 30 per cent of GDP as one of its key fiscal anchors."

In order for DBRS to make any improvement to Alberta's credit rating, the group says it must see "a sustained improvement in the fiscal deficit" as well as a number of other factors.

"We will take time to assess these considerations and Alberta's ability to adhere to its fiscal targets as we conduct a formal, in-depth review of the province in the coming months."