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Global market uncertainty impacting Alberta's fiscal picture

Government is taking action to control in-year spending because of ongoing market volatility and lower than expected revenues.

“My mandate is to deliver a balanced budget by 2013-14 and I will deliver on that mandate. Albertans have clear expectations that we live within our means so departments will manage with the budget they were allocated,” said President of Treasury Board and Finance Minister Doug Horner. “We can’t control the world events that impact our revenue but we can take steps to stay on course.”

Going forward in 2012-13, government will cap overall operating spending, increase in-year savings to at least half a billion, review capital spending and respond to emergent needs as necessary.

Revenue decreased by $400 million in first quarter because of lower bitumen royalties, lower conventional oil royalties and lower Crown land lease sales. Expenses increased by $5 million due to disaster funding. Based on the results so far this year, Alberta could see a deficit of between $2.3 billion to $3 billion.

Historically, first quarter does not indicate the province’s fiscal position at year end but if revenue remains low, government will further tighten its belt to address pressures.

“All economic indicators show a promising long-term future for Alberta. We are leading the country in housing starts, have the lowest unemployment rate, the highest job growth and maintain the lowest overall taxes,” said Horner. “However, there are short-term hurdles to clear, so we must take a prudent approach to ensure our economy remains strong.”

The Alberta government will continue to invest in key priorities such as health, education and social programs. This is what Alberta families expect to meet the needs of a growing province.

Summary

2012-13 First Quarter Actuals (April 1 - June 30, 2012)

$ millions

  Budget Q1 Budget Q1 Actual
Revenue $40,263 $9,698 $9,309
Expense $41,149 $9,892 $9,897

Surplus/

(Deficit)

($886) ($194) ($588)

Sustainability

Fund

as of June 30, 2012 as of June 30, 2012 $6.3 billion

Daily Oil Price - January 2008 to present

Click link to view graph:
http://finance.alberta.ca/whatsnew/newsrel/2012/index.html#first-quarter

Backgrounder: Alberta economy stays strong amid global uncertainty.

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Media inquiries may be directed to:
Kathleen Range
Press Secretary
Treasury Board and Finance
780-427-5357
kathleen.range@gov.ab.ca
https://twitter.com/AB_TB_Finance

To call toll free within Alberta dial 310-0000.

Backgrounder

Alberta economy stays strong amid global uncertainty

Alberta’s economy continues to perform in 2012, despite challenges in the global economic climate. Job creation, retail sales, exports, housing starts and one of the lowest unemployment rates in Canada are all indications that Alberta’s economy is solid.

Key Economic Indicators

  • Real GDP on pace to expand by 3.8 per cent this year. Private sector forecasters such as RBC, TD and the Conference Board of Canada expect Alberta to lead all provinces in growth.
  • Manufacturing shipments are up 10.6 per cent in the first half of 2012 over last year, behind only Newfoundland and Saskatchewan.
  • Farm cash receipts rose by a record 28.3 per cent in the first quarter over this time last year.
  • Employment is up 3.2 per cent in the first seven months of 2012 over the same period last year, leading all provinces.
  • Alberta currently has the lowest unemployment rate in the country at 4.6 per cent, and it is expected to average 4.9 per cent this year.
  • Alberta’s population is expected to grow by 2.1 per cent in 2012, up from 1.8 per cent forecast at budget.
  • Housing starts are up 46 per cent through the first seven months over last year, the highest increase in the country.
  • Retails sales have grown by 8.8 per cent in the first half of 2012 over last year, the fastest growth among all provinces.
  • Total personal income is forecast to increase 6.2 per cent this year.

Oil Price Forecast Changes

Both the government and private sector forecasters have adjusted their forecasts for oil prices for 2012 (figure 1).

Figure 1

Source

Budget Forecast*

First Quarter Forecast*

Conference Board of Canada

$99.64

$95.40

Deutsche Bank

$105.00

$93.79

RBC Capital Markets

$100.00

$92.00

GLJ Petroleum Consultants

$97.00

$91.57

*for calendar year 2012

At budget, the private sector forecast for oil prices ranged from a low of $91 per barrel to a high of $120, with an average of $99.38. At first quarter, that range changed to a low of $90 and a high of $106. The average now stands at $93.62 (figure 2 - click link to view: http://finance.alberta.ca/whatsnew/newsrel/2012/index.html#first-quarter). Although our economy is strong, volatile oil prices can have an impact on the province’s bottom line (figure 3 - click link to view: http://finance.alberta.ca/whatsnew/newsrel/2012/index.html#first-quarter).

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Media inquiries may be directed to:
Kathleen Range
Press Secretary
Treasury Board and Finance
780-427-5357
kathleen.range@gov.ab.ca
https://twitter.com/AB_TB_Finance

To call toll free within Alberta dial 310-0000.