Alberta’s projected deficit drops to $ 5.8 billion, largely supported by soaring global energy prices – .

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Alberta’s projected deficit drops to $ 5.8 billion, largely supported by soaring global energy prices – .


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Alberta’s forecast deficit for this fiscal year has narrowed again, largely due to a surge in oil prices, even as global markets collapsed amid concerns over the Omicron COVID-19 variant.

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The latest budget update, released Tuesday by Finance Minister Travis Toews, projects a deficit of $ 5.8 billion in 2021-22, $ 12.4 billion lower than forecast in the February budget and $ 2 billion lower than in the last August budget update.

Over the next two years, deficits of $ 3.3 billion and $ 2.3 billion are forecast, which is $ 7.7 billion and $ 5.7 billion less than the original budget. Taxpayer-financed debt is expected to reach $ 101.6 billion by March 31, the last day of the fiscal year. The net debt to GDP ratio is estimated at 19.2%.

At a press conference on Tuesday, Toews attributed the economic growth to fiscal management and the government’s stimulus package.

“Our economic recovery is increasingly entrenched,” he said, adding that an essential part of this plan is focused on growing the natural resources sector.

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Resource revenues responsible for most of the peak

Total revenues in 2021-2022 are expected to reach $ 57.9 billion, or $ 14.2 billion over budget, with more than half of the increase coming from resource revenues, the document said.

Non-renewable resource revenues are expected to reach $ 10.9 billion in 2021-2022, $ 7.8 billion more than in 2020-2021 and $ 8.1 billion more than forecast in the 2021 budget. document warns that revenues are expected to drop to $ 9.9 billion and $ 9.2 billion over the next two years as energy prices stabilize.

The price of West Texas Intermediate (WTI) is expected to be US $ 70.50 per barrel, which is $ 24.50 more than originally budgeted and US $ 5 per barrel more than forecast in the update. August day.

The emergence of the Omicron variant has rekindled fears of travel restrictions, blockages, rising inflation and slowing economic growth. Oil prices fell and global stock indices fell on Tuesday after a warning from drugmaker Moderna that existing vaccines are unlikely to be as effective against the new variant.

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“The events of the past few days around this new COVID variant remind us that we are still in a time of great uncertainty and volatility,” Toews said.

“It reminds us that we need to focus on what we can manage, focus on economic growth and stay the course on spending. “

Alberta government officials said on Tuesday they took the new variant into account in their latest projections and that WTI owed an average of $ 69 a barrel for the rest of the year to meet the forecast.

As of Monday afternoon, WTI stood at US $ 70.06 per barrel.

Bitumen royalties represent about 70% of resource revenues, reaching an all-time high. Royalties have gone from a forecast of $ 1.4 billion in the budget, to $ 7 billion in August, to $ 7.6 billion in the latest update.

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The government noted that drilling activity and oil production have increased in Alberta, with five oil sands projects slated to move into the post-payment phase in 2021, when royalties are generally higher, and another project in 2022. In 2020, there were 61 projects underway. after payment, or about 1.9 million barrels per day.

Drought drives up spending

Total spending increased by $ 1.8 billion from the 2021 budget mainly due to $ 1.4 billion in contingency funds for the agricultural sector after being hit by extreme drought conditions.

As of September, the province had spent $ 814 million on healthcare operating expenses related to COVID-19, including laboratory tests, vaccine deployment, personal protective equipment and continuing care.

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Spending on COVID-19 and the stimulus package is now expected to rise to $ 2.8 billion, partially offset by $ 859 million on a $ 1.75 billion COVID-19 contingency and stimulus fund. dollars. An estimated $ 336 million from the COVID-19 contingency and an additional $ 96 million for the stimulus package remains unspent.

Toews reiterated that the government will come up with a plan to balance the budget once the pandemic is over and that there will be “more clarity on long-term global impacts,” but did not provide a specific timeline.

Rising GDP

The UCP government paints a relatively rosy picture of Alberta’s economic growth, forecasting a 6.7% increase in exports, an increase in investment, a drop in the unemployment rate to an average of 8.8% in 2021.

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He also expects corporate income tax revenues to grow by an average of 19% over the next two years, to $ 2.9 billion from a forecast of $ 2.5 billion. in August, or $ 591 million more than in the February budget.

The UCP government cut the corporate tax rate to 8%, from 12% over a two-year period starting in 2019. Tuesday’s documents predict that tax revenues will not return to pre-cut levels. 2023-24.

Still, Toews defended the cuts, saying they boost investment and increase income overall.

“The good news is that we are recouping any drop in corporate tax revenue very quickly. At the same time, we have all the benefits of expanded fiscal capacity and expanded employment opportunities for Albertans, ”he said.

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After the province’s real gross domestic product fell about 7.9 percent last year, the government now predicts it will grow 6.1 percent.

NDP finance critic Shannon Phillips slammed the government for not doing more to help people meet their daily costs, highlighting in particular the 2019 decision to deindex the income tax. income so that it is not linked to inflation as well as similar measures with AISH and other supports.

“Although the UCP government is injecting new money, Albertans are not. In fact it is quite the opposite. Alberta families are falling far behind.

Government revenue from personal income tax is expected to increase by $ 1.4 billion over budget.

“It’s money out of every pocket of taxfilers in Alberta as the cost of everything from gasoline to ground beef skyrockets,” Phillips said.

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When asked if and where the provincial government was prepared to step in to make things more affordable for Albertans amid inflation and rising prices, Toews said the two issues were largely related to federal policy and supply chain issues.

He said the Government of Alberta can have the most impact by creating a competitive business environment.

“Competition will ensure that products and services are offered in the most competitive and cost-effective manner and this will benefit all Alberta consumers.” “

The next budget update is scheduled for February 2022, when the government releases the next budget.

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