Modest economic recovery predicted in budget
The provincial government is not making any cuts and is predicting modest growth in the 2017 budget, while the debt continues to climb.
On Thursday afternoon the NDP government tabled its third provincial budget and predicted 2.6 per cent GDP growth this year combined with a $10.3 billion deficit, which includes a $500 million cushion for risk adjustment. The provincial debt this year will hit $45 billion and is predicted to clock in at $71 billion by 2020.
The unemployment rate isn’t expected to move much, with the projected rate to sit at 8 per cent by the end of the year. By 2019 the government expects that number to drop to 7.1 per cent.
Finance Minister Joe Ceci said his government will continue its capital spending and will not cut funding to core public services, while still planning on gradually reducing the provincial debt.
“We are not out of the woods yet, far from it.” Ceci said. “ But there are hopeful economic signs, what I refer to as green shoots.”
The government will continue to sink a record $9.2 billion into capital projects.
The NDP has pledged to construct a new courthouse in Red Deer and a new hospital in Edmonton, but there is no word on any capital projects in St. Albert.
Total revenue for the year is forecast to be $45 billion or 4.8 per cent higher than the 2016-2017 forecast, while operating expenses will clock in at $54.9 billion, or 3.9 per cent increase from the last budget.
By 2019 the government anticipates a $7 billion deficit and unemployment sitting at 7 per cent. By 2023-2024 the government is hoping to return to balance.
Debt servicing costs will continue to climb and are estimated to hit $1.4 billion for the 2017-2018 year. By the 2019-2020 fiscal year debt servicing costs will balloon to just under $2.3 billion.
Despite the rising debt, the government is seeing increased revenue. Resource revenue from bitumen royalties is predicted to more than double from the 2016 budget forecast, up to $2.5 billion. Total revenue is expected to hit $51.8 billion by 2019-2020, largely due to oil revenues climbing.
The government isn’t predicting numbers in the black until 2023-2024.
The government anticipates bringing the deficit down to $7.2 billion by 2019-2020, which accounts for a $1 billion risk adjustment.
Despite the growing debt, Ceci said his government will keep the debt to GDP ratio low. In 2015-2016 the debt to GDP ratio sit at 6 per cent, the lowest of all the provinces, but that number is expected to 13.8 per cent this year and eventually climb to 19.5 per cent in 2019-2020.
Right now the government has structured the budget around the price of oil sitting at $55 dollars per barrel for the year and eventually rising to $68 per barrel by 2019-2020. On Tuesday morning ATB announced oil had dropped to around $48 per barrel. Ceci said he isn’t worried about the temporary drop in oil price.
Alberta is banking on the construction of the Line 3 and Kinder Morgan pipelines to dig the province out of the red, and Ceci anticipates those projects to be completed on time by 2021.
After the announcement of last year’s budget, the province saw its credit rating get downgraded twice in several months. The reports cited a concern with Alberta’s drastic jump in borrowing with no clear path to repay the debts.
Ceci said the way his government will find a way out of the red with rising energy price as well as spending increases remaining below inflation and population growth.
The governments projected spending does not include any potential raises for public sector workers, like nurses and teachers, who will be negotiating new contracts.
