- Deficit estimate raised to C$5.88 billion for this fiscal year
- Provincial economy seen shrinking 0.6 percent in 2015
Alberta expects its biggest-ever deficit this fiscal year as slumping oil prices send the western Canadian province into a recession and spending on wildfire and drought relief rises.
The deficit estimate for the year that started in April was increased to C$5.88 billion ($4.5 billion) from a March forecast of C$5.07 billion, Alberta’s finance ministry said in a statement Monday. The provincial economy will shrink by 0.6 percent in 2015, compared with an earlier forecast for 0.4 percent growth, the ministry said.
Home to Canada’s oil sands, the province has seen thousands of job cuts and reduced investment as crude trades at about half its price a year ago in New York. This year will be the first recession for Alberta since 2009 and the deficit will be the largest in the province’s history.
“There is no doubt many Alberta families and businesses are feeling the effects of the dramatic drop in oil prices,” Finance Minister Joe Ceci said in a briefing from Edmonton on Monday. “Forecasts indicate our economy will recover in 2016.”
Premier Rachel Notley is juggling the oil price crash and job cuts in Alberta’s most important industry with the need to spend on roads, schools and hospitals that have been neglected in recent years as the population grew at one of the fastest rates in Canada. Her government has raised income taxes to compensate for declining oil and natural gas royalties.
Economic growth of 1.3 percent next year will fall short of an earlier target by 0.4 percentage point, the ministry said. The forecast doesn’t reflect the recent drop in crude prices that sent West Texas Intermediate below $40 a barrel in August.
The U.S. benchmark settled at $49.20 on Monday after rebounding 27 percent in the last three sessions on signs the U.S. economy is strengthening and the shale boom is waning, while the Organization of Petroleum Exporting Countries said it’s ready to talk to other global producers to achieve “fair price.”
The government forecasts C$6.24 billion in direct borrowing for capital purposes in the current fiscal year, compared with a March target of C$5.68 billion, according to the statement. Alberta has C$28.6 billion in outstanding notes, according to data compiled by Bloomberg.