Economic recovery underway, deficit steady

The Alberta government now forecasts the economy to grow by 3.1 per cent in 2017, up from the budget forecast of 2.6 per cent, as detailed in the First Quarter Fiscal Update and Economic Statement. Most private sector and other forecasters expect Alberta’s economic growth to lead the provinces in 2017.

Alberta added nearly 17,000 jobs so far this year and employment is now forecast to grow by 1.3 per cent in 2017, up from 0.9 per cent forecast at budget.

The Alberta Activity Index, a weighted average of nine monthly economic indicators, climbed about five per cent through to May. Other positive economic indicators include:

• The number of rigs drilling averaged 127 in the first seven months of 2017, doubling over the same period in 2016.
• Housing starts through July increased 23 per cent from the same period 2016.
• Non-energy exports were up 7.1 per cent in the first half of 2017 and reached the second highest mark on record in March at $2.9 billion.

“Our plan to support jobs and economic growth is working and we will continue to have Albertans’ backs as we regain the losses from the recession. There is good reason to feel optimistic about Alberta’s recovery and we will continue on the path to balance while supporting the needs of everyday Albertans.”

Despite a recovering economy, the persistent effects of the downturn and a lower-than-expected oil price weighed on provincial revenue. This was partly offset by an improved light-heavy crude differential, along with higher revenue from Crown lease sales and investment income.

Government is addressing the revenue shortfall by using $250 million of the budgeted $500 million risk adjustment and targeting a further $200 million on top of the $200 million in savings proposed in Budget 2017. The forecast deficit is unchanged from budget at $10.5 billion.

“Our plan is clear and it is working – we will reduce the deficit over time by restraining growth in spending while protecting health care, education and the other services Albertans count on. The severe and reckless cuts proposed by others to take billions out of the budget this year would hurt Alberta, put people out of work and weaken the economic recovery.”

2017-18 First quarter forecast ($ millions)

Full-year forecast	Budget 2017	Q1 forecast	Change from Budget
Income taxes	$15,095	$14,730	$(365)
Non-renewable resource revenue	3,754	3,377	(377)
Other revenue	26,173	26,267	94
Total revenue	45,022	44,374	(648)
Operating expense (net of in-year savings)	46,010	45,812	(198)
Climate Leadership Plan operating expense	868	768	(100)
Disaster/emergency assistance expense	235	213	(22)
Other expense	7,906	7,869	(37)
Total expense	55,019	54,662	(357)
Risk adjustment	(500)	(250)	250
Deficit	$(10,497)	$(10,538)	$(41)

Energy and economic assumptions	Budget 2017	Q1 forecast	Change from Budget
WTI (US$/bbl) *	55	49	(6)
Exchange rate (US¢/Cdn$)*	76	77	1
Real GDP growth (%)**	2.6	3.1	0.5
Unemployment rate (%)**	8.0	7.8	(0.2)

Three-month actuals ($ millions)

April 1 to June 30	Budget	Actuals	Change from Budget
Revenue	$11,564	$12,187	$623
Expense	14,989	14,594	$(395)
Deficit	$(3,425)	$(2,407)	$1,018