Extra-low oil prices are forcing the Alberta government to draw on its reserve fund to keep its annual deficit from increasing beyond C$10.5 billion.
The province based its budget for this year on an average price of US$55 per barrel, Finance Minister Joe Ceci said in his first-quarter fiscal update Wednesday. “Instead,” Canadian Press notes, “it’s hovering below $49 a barrel and isn’t expected to rise much in the near term.”
Left unattended, that difference would add $291 million to the provincial deficit by the end of the 2017/18 fiscal year. “The big hit comes from oilsands royalties,” CP notes. “The province had hoped to bring in $2.5 billion this year, but now expects to take in $563 million less.”
Personal and corporate income taxes are also lagging, Ceci said. But “as the economy strengthens and gains more momentum, we anticipate seeing those numbers come back.” The government now expects the Alberta economy to grow 3.1% this year, up from the 2.6% in Ceci’s March budget forecast.
“For the time being, we’re going to keep delivering the programs and services Albertans rely on, and for the time being we’re going to keep up the pressure on finding…savings, because those are some of the things we can control,” he said. “The thing we can’t control is the world price of oil.”
On Thursday, the benchmark West Texas Intermediate oil price settled in around $48.25 per barrel.