The Alberta government’s February budget projects a deficit of $6.8 billion but became out of date weeks later when COVID-19 and low oil prices hit the province. On August 27, the government provided a fiscal update and forecast the deficit to hit $24.2 billion.
The province’s new deficit forecast would be its largest deficit on record since the 1980s. The bulk of that increase – roughly 70 per cent – is a result of a sharp decline in government revenues.
The province’s debt now totals $99.6 billion. The debt-to-GDP ratio has increased to 22 per cent. The province’s real GDP will decline by 8.8 per cent in 2020. Alberta has also experienced a 13 per cent unemployment rate with a loss of 170,000 jobs. Resource revenues have dropped to $1.2 billion, the lowest since the early 1970s.
The figures are sobering and predict a grim reality for Albertans in the short-term. As a result, the Alberta government plans to deliver the most cost-effective government services possible. This means potential cost cutting and the privatization of some services. The government has no plans to increase taxes or implement a sales tax.
The government will add $1.4 billion to its capital spending plan for this year and plans to spend nearly $10 billion on infrastructure projects. This will mean potential opportunities for CPA members engaged in the construction sector.
Finance Minister Travis Toews expects to see a partial rebound of 4.6 per cent next year. Employment is unlikely to fully recover until after 2021, while real GDP rates likely won’t surpass 2019 levels until at least 2022. The province intendeds to provide an updated three-year fiscal projection in November, along with a new budget in February 2021.
While economic activity is expected to improve as public health measures are gradually lifted, the government warned the pace of recovery would depend on how the pandemic unfolds. A second wave of infections could mean additional public health measures and derail the recovery in the global economy and oil prices.
Alberta’s drop in non-resource revenue means it will qualify for a fiscal stabilization payment from the federal government. However, the current cap of $60 per head means the most the province could get would be about a quarter of a billion dollars, which is small compared to the reduction in revenue the province has experienced.
The CPA will be asking for meetings with members of the Alberta government to advance the use of propane and diversification for increased economic opportunity.
For further information, please contact Government Relations Director, West, Tanis Fiss at: tanisfiss@propane.ca.