Largest deficit 'by a country mile' expected ahead of Alberta fiscal update
CALGARY -- Premier Jason Kenney is painting a grim financial picture for the province as the UCP government is expected to release first quarter numbers for the 2020-2021 fiscal year.
Kenney says Alberta is dealing with the biggest deficit in the province's history by what he calls "a country mile."
"It will be well north of the $20 billion deficit mark in part because of the total collapse of revenues emanating from the coronavirus recession," Kenney said.
"Other provinces and federal governments around the world are seeing extraordinary deficits this year and we will likely next year, but what’s made it especially tough in Alberta was the total collapse of energy prices."
Kenney adds that revenue is more than $10 billion lower than expected. However, the provincial government has defended its original budget released in February because it was based on realistic projection at the time.
Finance Minister Travis Toews tabled a budget with a projected $6.8 billion deficit with debt expected to rise to almost $77 billion by next spring and almost $88 billion by 2023. The price of West Texas Intermediate was also expected to average $58 US per barrel.
Kenney notes that all of that changed in the first week of March.
"There’s a great fiscal reckoning on the horizon. Our debt will go up very significantly and , in the future, we will as a province have to deal with that."
The Conference Board of Canada expects Alberta's GDP to plummet by 11.3 per cent this year, the worst in the country. In the conference board's provincial outlook, it notes that this province "has been hit doubly hard this year" due to plunging oil prices, followed by COVID-19 shutdowns.
"I do think that the worst is behind us," says the conference board's chief economist Pedro Antunes," but we are expecting to see a bumpy ride for the next year."
Antunes notes it'll be a long road to recovery for Alberta's oil and gas producers. Even though pandemic restrictions are starting to be lifted and more travellers are driving and flying, demand for transportation fuel will climb slowly.
"It's going to take a long time, we feel, to get those (oil and gas) inventories down and see oil prices get back above the $50 and $60 range. It'll take a couple of years," he says.
The outlook isn't all bad in alberta, Antunes says, as both provincial GDP and household spending is expected to increase by 7.9 per cent each for 2021.
The Kenney government has since launched an economic recovery plan to spend $10 billion on projects including health care facilities, pipelines, schools and drug treatment centres.
The province also accelerated the implementation of corporate tax cuts by slashing the rate from 10 per cent to eight per cent on July 1. The government claims those cuts will create an additional 55,000 jobs by 2022 and attract $4 billion in investment annually, starting in 2023.
Shannon Phillips, Alberta’s opposition NDP finance critic, said the UCP has not delivered on job creation or presented a reasonable, practical plan for economic recovery and growth.
"As we’re about to learn with the fiscal update, this was the case before the pandemic," Phillips said. "But since the pandemic, the choices we have seen the UCP government make have just made a bad situation worse."
With files from The Canadian Press