EDMONTON: The effect of low oil prices haven’t yet had a dramatic impact on Alberta finances, according to the province’s first-quarter update released Monday, but the worst may be yet to come.
A steep drop in the price of West Texas Intermediate crude in August is prompting finance officials to revise their estimates for the rest of the fiscal year.
Alberta is forecast to end the year with a $5.9-billion deficit, $814 million more than forecast in the March 2015 budget, which was introduced but never passed by the previous government.
However, this forecast was finalized on July 30 before the price of WTI crude started dropping well below the $57.94 US average in April, May and June.
Finance Minister Joe Ceci said his NDP government inherited a bad situation from the previous Progressive Conservative government.
“The previous Conservative governments weren’t able to balance Alberta’s budget in five of the last six years when oil was averaging about $90 a barrel,” he said.
“They failed to diversify the economy, failed to ensure that those that could were paying their fair share and failed to save for a rainy day.”
The 0.6 per cent contraction in GDP and an increasing unemployment rate, which was at 6.0 per cent in July, suggest Alberta is in a mild recession. About 139,000 Albertans will be out of work in 2015, 28,000 more than in 2014, the fiscal update forecasts.
One particular fact stands out — vehicle sales are down 9.2 per cent from the same time last year. This is due to a decrease in the sales of expensive pickup trucks, another indication of how the drop in oil is affecting the resource sector.
The province is forecasting a $1-billion increase in revenue for 2015-2016, partly due to an increase in corporate and personal income tax rates, which will add another $497 million to the treasury.
Expenses are forecast at $50.2 billion, $1.8 billion more than projected in the March budget.
Disaster assistance is forecast to be the highest ever. Spending due to wildfires and drought is projected to be $757 million, $456 million more than forecast in March.
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