Alberta Finance Minister Joe Ceci arrives at a press conference in Edmonton, on June 29, 2017.The Canadian Press
Alberta’s NDP government has cut its expectations for the economy in the coming year as volatile oil prices and constrained pipeline access continue to drag down growth ahead of a provincial election.
Finance Minister Joe Ceci presented his latest quarterly fiscal results on Wednesday, which could be the final window into the province’s finances ahead of the spring campaign. Mr. Ceci boasted that the government had reduced its projected deficit for the current fiscal year to $6.9-billion, instead of the $8.8-billion forecast a year ago, in part due to higher-than-expected resource revenues.
But the government also acknowledged that record-low prices for Alberta crude last fall hurt job growth, cut into production and caused investment in the sector to dry up. Consequently, the province cut its forecast for real GDP growth in 2019 to 1.6 per cent, down from 2.5-per-cent forecast in last year’s budget. The province expects to remain in deficit for the next four years as the provincial debt climbs to nearly $100-billion.
Mr. Ceci said the province is still on track to balance the budget by 2023-24 while avoiding cuts to services.
“Do we have more work to do? No doubt," Mr. Ceci told a news conference in Edmonton. "Although our economy is growing, the recovery has not reached every kitchen table. And pipeline bottlenecks remain a serious issue.”
The province has yet to recover from an economic downturn that has dragged on through Premier Rachel Notley’s entire first term in office, and the management of the economy and the province’s finances will likely be a major focus of the spring campaign.
The plan to balance the budget relies on resource revenues rebounding significantly, from $5.5-billion in the current fiscal year to more than $12-billion in 2023-24. Mr. Ceci, who has repeatedly talked about the need to get Alberta off the “royalty roller-coaster,” said the forecasts were prudent and conservative.
Around 170,000 Albertans are currently unemployed, not including people who have stopped looking for work. The province expects its unemployment rate to average 6.4 per cent in 2019, a slight improvement over last year.
Prices for the province’s oil collapsed last year, when the gap – or differential – between Alberta crude and West Texas Intermediate topped US$50 a barrel.
The government responded by imposing production cuts that took effect Jan. 1, which quickly narrowed the differential to less than US$10. The policy has caused oil production growth to slow and explains part of the drop in overall GDP growth.
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Jason Nixon, House Leader for the Opposition United Conservatives, said Mr. Ceci’s update appeared to be a political event.
“They’re trying to operate as a government while still campaigning across the province,” Mr. Nixon said.
“It’s time for an election. It’s time for Albertans to decide who is best to run this province.”
The UCP also said Mr. Ceci’s update affirms the province is racking up crushing debt as the New Democrats failed to meet their own deadlines to balance the books.
Trevor Tombe, an economist who teaches at the University of Calgary, said Wednesday’s update increases the province’s reliance on resource revenues. He said the government has increased its expected revenues in future years compared with last year’s budget without any real explanation.
“We are as firmly on the royalty roller-coaster as we’ve ever been,” Dr. Tombe said in an interview.
“The reductions in the deficit over the coming years are almost entirely due to increases in royalty revenues. … Similar prices, similar production, yet much more royalty revenue.”
Dr. Tombe also noted that quarterly updates are typically limited to the current fiscal year, and it’s unusual for the government to produce a five-year projection at the same time.
The governing New Democrats will point to recent measures designed to intervene in the market, including the production cuts and a recent proposal to spend $3.7-billion to lease rail cars. The government has also been handing out billions of dollars in grants and loan guarantees to upgrading and refining projects.
The United Conservative Party, under the leadership of Jason Kenney, has accused the current government of mismanaging the file. Mr. Kenney said he would cancel the crude-by-rail program and focus his efforts on pressing the federal government to build the new pipelines, including the stalled Trans Mountain expansion project, as soon as possible.
The election campaign could begin at any time. Under provincial legislation, the vote must occur by May 31.
The government has not said when it will trigger an election campaign. A Throne Speech has been scheduled for March 18.
With a report from The Canadian Press