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Alberta slashed its deficit forecast for the current fiscal year by 68% as surging oil prices drive economic growth in the western Canadian province.
The shortfall is now estimated at C$5.8 billion ($4.5 billion) for the year ending March 31, C$12.4 billion lower than in the original budget, according to the province’s fiscal update released Tuesday.
Holder of the world’s third-largest oil reserves, Alberta has seen a rising windfall from oil royalties this year after the pandemic curtailed oil demand in 2020, prompting oil sands producers to slash production.
The province’s revenue of C$57.9 billion will exceed the original forecast by C$14.2 billion. Expenses also rose by C$1.8 billion from the previous forecast to $63.7 billion after a C$1.4 billion provision was added for potential crop insurance indemnities because of drought conditions this year.
After contracting 7.9% last year, the province’s economy will grow 6.1% in 2021. Oil and gas investment, which plunged 37% in 2020, will rise back to 2019 levels by next year, reaching C$26 billion.
- Deficits will narrow to C$3.3 billion in the 2022-2023 fiscal year, and to C$2.3 billion in 2023-2024.
- Taxpayer-funded debt will reach C$101.6 billion by March 31, C$9 billion less than forecast earlier.
- U.S. oil prices will average $70.50 a barrel in 2021-2022, $24.50 more than estimated in original budget.
- West Texas Intermediate will drop to $64 a barrel in 2022-2023 as global demand moderates and supply rises
- Heavy Canadian crude’s discount to WTI to average $14.40 a barrel, $1.10 wider than in first quarter estimate, as high natural gas prices make refining high-sulfur crude more expensive
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