Alberta managing effect of oil shock through balanced approach
Today’s Standard & Poor’s report underlines the strength of Alberta’s fiscal management – and the consequences of the steep current drop in the global price of oil on our economy and finances.
“Obviously we are disappointed by today’s report. The steep drop in the price of oil is hitting Alberta hard – including our provincial finances. But we are committed to managing the oil price shock in a responsible and balanced fashion.”
The S&P report is complimentary of Alberta’s fiscal management, but has reduced the province’s rating by one step. The report points to the effects of oil prices on the province’s bottom line as the primary reason for the downgrade.
“We believe that this ratings report will have little or no effect on Alberta’s borrowing costs, because our province’s bond holders have already priced the effect of oil price swings into the market. Our province is carefully controlling its costs, without unnecessarily damaging frontline public services. We have adopted a balanced and responsible fiscal policy.”
The Health budget has been capped at four per cent growth, after many years of growing an average of six per cent. Growth will then be held to three per cent and then two per cent as was indicated in the budget.
Total government expense, excluding health, will be limited to 1.7 per cent in 2016-17 and two per cent in 2017-18, below projected population plus inflation growth.
Hiring restraint is in effect in all government departments.
The Government of Alberta is limiting debt to 15 per cent of GDP, half the average of Canadian provinces.
“Alberta’s government is focused on diversifying our province’s economy to reduce our vulnerability to commodity price swings. In challenging times like these, our government is showing leadership on the economy, working to expand our access to markets, diversifying in key sectors like agriculture, forestry and tourism, expanding access to capital for growing Alberta businesses and investing in infrastructure—all of which will help promote job creation and help to protect Alberta from these types of price shocks in the future.”
Other key facts:
- Alberta has, and will continue to have, by far the strongest balance sheet of any jurisdiction in Canada and the highest net asset position of any province.
- Alberta is maintaining, by far, the lowest overall provincial taxes in Canada.
- The S&P report details Alberta’s strong fiscal management and control. In spite of the sharp decline in the price of oil, Alberta’s finances are the strongest among Canadian provinces.
- While S&P has changed its credit outlook, DBRS recently affirmed our province’s triple-A rating, the strongest of any province in Canada.
- In its report, S&P complimented Alberta’s “exceptional liquidity, very strong financial management, still strong economy and budgetary flexibility, and low contingent liabilities.”