The global health crisis, economic recession and low oil prices continue to significantly affect the province’s finances. The provincial government is projecting a $21.3-billion deficit for 2020-21, $2.8 billion less than last quarter largely due to improving revenue and government efforts to hold the line on spending.
“Alberta was the first province to introduce an economic recovery plan in response to COVID-19, and we will also be the first to introduce a comprehensive plan to bring Alberta back to prosperity. The foundation of the next provincial budget will be to bring spending in line with other jurisdictions, keep the net debt-to-GDP ratio well below 30 per cent, and have a plan for balancing the budget as we get through the pandemic and there is more economic certainty.”
Expenses not including COVID-19 measures have decreased $156 million from Budget 2020. Total expense is forecast at $62.7 billion, up $135 million from last quarter and $5.4 billion from Budget 2020. The additional spending is for health care, personal protective equipment, municipal grants, financial supports to Albertans and businesses to help with the effects of the pandemic, and stimulus initiatives detailed in Alberta’s Recovery Plan. Taxpayer-supported debt is forecast to be $97.4 billion by the end of the fiscal year, a reduction of more than $2 billion since first quarter.
The revenue forecast is nearly $3 billion higher than last quarter, at $41.4 billion. The increase from first quarter is due to improved forecasts for non-renewable resource revenue, gaming revenue, investment income, and transfers from the Government of Canada.
While there is a long road ahead to full recovery, Alberta’s economy is gradually emerging from the depths of the downturn. Alberta’s real GDP is expected to contract 8.1 per cent rather than the 8.8 per cent reported in August. Real GDP is expected to fully recover to 2014 levels in 2023. Alberta has also seen a significant rebound in employment already this year, recovering more than 258,000 of the 360,900 jobs lost between February and April.
Alberta’s government remains committed to maintaining fiscal discipline and balancing the budget once there is a better sense of what the future holds regarding COVID-19, global economic conditions and energy and financial markets. The goal of balancing the budget in 2022-23 is being necessarily adjusted.
Although the latest fiscal update shows some improvement to the province’s finances, COVID-19 is emphasizing the urgent need for changes to Canada’s fiscal stabilization program. Payments to provinces are capped at $60 per resident; this cap was brought in more than 30 years ago and has not risen. As a result, payments are much smaller than provinces need, especially Alberta, which has been hit harder than other provinces by low oil prices and the pandemic-driven economic downturn.
- The deficit for 2020-21 is forecast at $21.3 billion, $2.8 billion lower than in the first quarter fiscal update.
- The second quarter revenue forecast for 2020-21 is $41.4 billion, nearly $3 billion higher than in the first quarter fiscal update.
- Expense is forecast at $62.7 billion, up $135 million from the first quarter fiscal update, largely due to costs related to the pandemic and recovery efforts.
- Expenses not including COVID-19 measures have decreased $156 million from Budget 2020.
- The government has introduced an appropriation bill in the legislative assembly. The bill requests a total of $5.7 billion from the General Revenue Fund mainly for the COVID-19 response and Alberta’s Recovery Plan. Top items include health-care funding, municipal supports and capital grants and investments for infrastructure projects.