Alberta economy is Canada's strongest, says new report

Alberta's economy is in the best financial shape of any province in the country, according to a new report from the Conference Board of Canada.

Greatest risk to province is reliance on royalty revenue for program spending, report says

The Conference Board of Canada says Alberta's economy is expected to see the strongest growth of any province in the country but flags potential economic constraint from pipeline development delays as a risk factor. (Kinder Morgan)

Alberta's economy is in the best financial shape of any province in the country, according to a new report from the Conference Board of Canada.

The report, titled Alberta Fiscal Snapshot: Promising (But Potentially Risky) Prospectstouts the province's high employment, strong wages and oil and gas revenues and also predicts higher resource revenues for Alberta over the next year or two. However, it also flags those expected revenues as the greatest risk to the province's future.

"Overall, Alberta is in a very sound position," said Matthew Stewart, the Board's associate director for Canadian outlook. "Perhaps the greatest risk to Alberta's future is its high reliance on royalty revenues to fund program spending. Funding so much of its operating expenditures with resource revenues helps to keep provincial tax rates low. But a large decline in royalties, such as what occurred in 2008-09, would make achieving and maintaining a balanced budget much harder."

Earlier this year, the Alberta government predicated a $1.1 billion surplus for the 2014/2015 budget.

Now, the report suggests the province will actually see a $1.7 billion surplus.

It also predicts Alberta's real GDP will rise by 3.5 per cent in 2014 and 3.1 per cent in 2015, which will continue to fuel high employment and wages.

Pipeline stalls, health care spending flagged

However, the reports said Alberta's projected economic growth could be threatened if pipeline development stalls and if officials cannot rein in health care spending.

Uncertainty around the fates of the Keystone XL and Northern Gateway pipelines are also flagged as two hot-button issues, with the report predicting that additional pipeline capacity will be needed within the next five to 10 years.

Still, the report says analysts are confident the need for additional oilsands pipeline capacity will be met.

"Our projections, especially the long term projections, assume that the pipelines will be built and that the price that Alberta is getting for its oil is not going to fall considerably below the international [rate]," said Stewart.

The Conference Board of Canada is predicting Alberta's health care spending will increase and says not reining it in could jeopardize the province's economy. (Conference Board of Canada, Alberta Ministry of Finance)


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