Alberta deficit forecast drops to $9.1B, as province gains 90,000 jobs in latest financial update
GDP growth bumped to 4.5 per cent in third-quarter update
Alberta is now forecasting a year-end deficit of $9.1 billion, a drop of $1.4 billion from the figure in the March 2017 budget.
The improvement, reported Wednesday in the third-quarter update, is mostly due to higher oil and gas revenues and gains in investment income.
The brightening economic outlook has prompted Alberta Finance to update its GDP prediction for the third time this fiscal year.
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Growth is now forecast at 4.5 per cent for 2017, compared to four per cent at the second quarter and 2.6 per cent in the budget.
The provincial unemployment rate has been revised to 6.8 per cent, an improvement over the 7.6-per-cent rate forecast in March 2017.
Finance Minister Joe Ceci said nearly 90,000 full-time jobs were added between January 2017 and January 2018, with 12,500 in mining and oil and gas production, nearly 23,000 in manufacturing, about 8,000 in the financial and real estate sector, 7,100 in transportation and warehousing and 5,700 in the accommodation and food service sector.
The province lost 43,000 part-time jobs during that period, he said.
Ceci said he expects the province's economy to be fully recovered in a year.
"We are forecasting we will be at pre-recession levels by 2019," he said.
The finance minister announced the 2018-19 budget will be released on March 22. The government is expected to lay out how it plans to return to balanced budgets by 2023.
Calgary recovered jobs faster than other parts of provinces, though officials admit the jobs gained aren't the same as those that were lost. The employment gains were slower in Red Deer and Grande Prairie.
Net interprovincial migration saw its first positive inflows in two years in the third quarter, which means people are moving to Alberta from other parts of Canada.
The third-quarter report covers October, November and December 2017. Figures provided in the March 2017 budget were projections of how the economy was expected to perform over the 2017-18 fiscal year, which ends March 31.
The quarterly reports update those projections over the course of the fiscal year.
Despite the positive news, some economic indicators show Alberta is still suffering lingering effects of the recession. Personal and corporate income taxes are down, and business investment outside the resource sector is still low.
Spending on gaming and liquor has dropped. Tobacco taxes have decreased as well, which suggests more people may be kicking the habit.
Bitumen royalties are down by $188 million but are offset by increases from conventional crude ($407 million) and natural gas ($102 million) due to lower production costs. The provincial treasury also benefited from a $429-million increase in bonuses and land sales.
Although revenue is up $2 billion, spending has increased by $1 billion. This is due to higher caseloads for social services and child welfare and a negotiated increase in RCMP salaries.
Ceci said the government reached its goal of finding $400 million in additional savings this year. He said some of the spending went to grants for municipalities.
"The increase in the revenues gave us the opportunity to address some capital needs that municipalities have," he said.
The province's opposition parties focused on the province's debt. That figure sits at $41.7 billion, which represents 12.4 per cent of the province's GDP.
Interest costs are forecast at $1.36 billion, a drop of $43 million from the figure in the March 2017 budget.
Opposition parties raise concerns
United Conservative Party Leader Jason Kenney said in a news release that the government's tax hikes have driven economic activity out of the province.
"Today's fiscal update once again confirms this, with the government collecting hundreds of millions of dollars less than planned," he said.
"At a time when competitiveness is increasingly important, the NDP has told the world that it's better to do business elsewhere, and Albertans continue to suffer as a result of the these misguided policies."
The party's finance critic, Drew Barnes, said the NDP government has a problem with spending. He noted Ceci didn't mention the consequences of carrying so much debt.
"I didn't hear him mention that right now Alberta — young Albertans, all Albertans —are paying $1.355 billion in interest costs this year," he said. "$1.4 billion in interest to bondholders and the rich."
Alberta Party MLA Greg Clark said he was disappointed the government spent half of the extra $2 billion in revenue.
"Let's not forget, this is spending over and above the budget that they set out just nine months before this update," Clark said. "If all they had done is stuck to the budget they actually put forward, the deficit would be a billion dollars lower and we would actually perhaps be on a real path to balance."
Clark said the government still has a huge deficit and continues to look to the price of oil to save its fiscal bacon.
"Hope is not a strategy," he said. "We need a proper plan to get his province back on track fiscally."
Alberta Finance devoted part of its third-quarter report to discussing the effects of pipeline bottlenecks on the province's finances.
Pipelines are at capacity and rail is not able to pick up the slack, the document said. That means oil supplies have been piling up in Alberta.
The difference in price between what Alberta gets for its crude and West Texas Intermediate widened to $14.50 per barrel in the third quarter.
Producers are losing about $30 million to $40 million a day due to that price difference, and officials estimate the decrease in royalties to be about $500 million this year.
Producers would earn an average of $7 more per barrel with access to new markets.
Alberta's NDP government has been pushing hard to get the $7.4-billion Trans Mountain pipeline expansion built from Edmonton to Burnaby, B.C.
The pipeline was approved by the National Energy Board and the federal government in 2016, but has been held up by a number of court challenges.
Premier Rachel Notley has argued the project would allow Alberta to get better prices for its crude oil by accessing new markets beyond the United States.