Alberta Finance Minister Iris Evans, speaking at the provincial legislature in Edmonton on Thursday, said the provincial economy is forecast to contract by two per cent over the next year. (CBC)

Alberta is facing a recession and 15,000 lost jobs, Finance Minister Iris Evans announced Thursday in her latest economic update.

"After years of robust economic growth, the provincial economy is forecast to contract by two per cent over this next year," Evans said.

The province is running a deficit estimated to be about $1 billion, but money left over from the 2007-08 fiscal year will be used to make sure government departments have enough money.

"That's going to supplement the revenue, take the place of revenues we'd have had from the Heritage Trust Fund … and help us offset what otherwise would be more of an operating deficit."

Evans was reluctant to discuss the $1-billion figure at Thursday's news conference, saying more definite figures will come when she releases her third-quarter economic update next week.

Alberta legislation prohibits the government from running a deficit.

NDP Leader Brian Mason said Evans is not being clear about what's going on.

"I don't think she's being straight with Albertans about this not being a deficit," Mason said. "This is not a deficit as defined by the act, and that's why I said, she doesn't have to go to jail, but really it's a deficit."

Mason accused the government of contributing to the province's budget woes by levying low resource royalty rates when oil prices were high.

Alberta Liberal finance critic and Calgary MLA Dave Taylor also had questions about Thursday's update.

"I'd like to see a budget. I'd like to see some details. I'd like to see some numbers.... I'd like to know whether this is a real deficit, a technical deficit or a hypothetical dollar deficit," he said.

World economy to blame: province

The province is blaming low energy prices and the global credit crunch for the change in the province's economic fortunes.

The province estimates job losses will raise the province's unemployment rate to 5.8 per cent from last year's rate of 3.6 per cent.

Evans is forecasting the economy will improve at the beginning of 2010.

The news marks a dramatic turn in Alberta's finances. Just last summer, when oil was at a high of $147 US a barrel, the province was forecasting an $8.5 billion surplus.

The drop in crude oil prices — crude for March delivery is now trading at less than $40 US a barrel — and turmoil in the world economy put a dent in that surplus. By the end of the second quarter on Sept. 30, the projected surplus had shrunk to $2 billion.