COVID-19 Updates: Taking steps to return to normal.
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COVID-19 Updates: Taking steps to return to normal.
Alberta’s economy is turning a corner and showing early signs of recovery, including higher exports, drilling activity and employment.
This release was issued under a previous government.
As reported in the government’s 2016-17 Third Quarter Fiscal Update and Economic Statement, Alberta’s economy is forecast to return to growth in 2017, following a prolonged downturn due to the oil price shock. While many Alberta families are still facing challenges due to the oil collapse, there continue to be green shoots in the economy:
Alberta’s economy is expected to grow by 2.4 per cent in 2017, spurred by higher oil and manufacturing exports, a modest improvement in oil prices, continued public-sector infrastructure investment and continued reconstruction after the Fort McMurray wildfire.
“A full economic recovery will take time after such a long downturn, but we are starting to see encouraging signs for Alberta in the year ahead. Some challenges still remain and that’s why we are sticking to our plan of putting Albertans to work by creating good jobs and diversifying our economy. We will continue to protect the services that Albertans depend on.”
The 2016-17 deficit is forecast to be $10.8 billion, consistent with the forecasts provided in the first and second quarter updates. Increased expense is offset by higher revenue and removal of the $700-million risk adjustment. It has been removed as the end of the fiscal year approaches.
Total revenue is now forecast at $42.9 billion, $1.5 billion higher than at budget, mainly due to improving resource revenue, federal transfers and investment income. The forecast for West Texas Intermediate (WTI) is now US$48/bbl, US$6 higher than estimated at budget.
Total expense is forecast at $53.7 billion, an increase of $2.6 billion from budget. In addition to the one-time expense being reported for the coal-transition agreements, main operating expense increases include:
Capital Plan spending is forecast at $7.3 billion, a $1.2 billion decrease from budget. Poor weather, soil and site conditions, and local permitting approvals contributed to construction delays. A number of projects in Fort McMurray, including the Northern Lights Health Centre repairs and heliport and three schools, were delayed due to the Wood Buffalo wildfire. Most of these funds are committed to specific projects and will be re-profiled to the next fiscal years. Even with the decrease this year in the Capital Plan, spending is still about $1 billion more than the average of the last five years.
On the advice of the Office of the Auditor General, government is recording a one-time $1.1 billion expense for agreements to phase out coal-fired electricity generation by 2030. Actual payments of this amount will be made over the next 14 years and is simply being reported in the 2016-17 fiscal year. This amount will be funded through the price on carbon.
As a result of this accounting treatment, government will exceed the operating expense increase limit legislated in the Fiscal Planning and Transparency Act. Under the Act, operating expense increases are limited to one per cent of budgeted operating expense, with exceptions for collective bargaining, First Nations settlements and disaster spending.
Government is increasing its borrowing authority by $14.5 billion to fund fiscal and capital plan needs into the next year. This also provides flexibility to borrow when rates are lower. The amount authorized is consistent with the 2017-18 targets published in Budget 2016.
Full-year forecast |
Budget 2016-17 |
Q3 forecast |
Change from Budget |
Income taxes |
$15,730 |
$14,803 |
$(927) |
Non-renewable resource revenue |
1,364 |
2,430 |
1,066 |
Other revenue |
24,341 |
25,705 |
1,364 |
Total revenue |
41,435 |
42,938 |
1,503 |
Operating expense (net of in-year savings) |
44,094 |
44,868 |
774 |
Climate Leadership Plan operating expense |
325 |
1,380 |
1,055 |
Disaster/emergency assistance expense |
246 |
1,354 |
1,108 |
Other expense |
6,432 |
6,142 |
(290) |
Total expense |
51,097 |
53,744 |
2,647 |
Risk adjustment |
(700) |
- |
700 |
Deficit |
$(10,362) |
$(10,806) |
$(444) |
|
Budget 2016 |
Q3 forecast |
Change from Budget |
WTI (US$/bbl) * |
42 |
48 |
6 |
Exchange rate (US¢/Cdn$)* |
73.5 |
76.0 |
2.5 |
Real GDP growth (%)** |
-1.4 |
-2.8 |
-1.4 |
Unemployment rate (%)** |
8 |
8.1 |
0.1 |
*2016-17 fiscal year
**2016 calendar year
Apr 1 to Dec 31 |
Budget |
Actuals |
Change from Budget |
Revenue |
$30,842 |
$32,600 |
$1,758 |
Expense |
38,358 |
39,307 |
949 |
Deficit |
$(7,516) |
$(6,707) |
$809 |