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March 23, 2018ALBERTA BUDGET 2018-19 Alberta's 2018-19 Budget indicates a deficit of $8.8 billion (including a risk adjustment of $500 million). This follows a deficit for 2017-18 now forecast at $9.1 billion.
Alberta's Budget now indicates a schedule for returning to balance, with declining deficits - particularly in 2021-22 and 2022-23 - before reaching a surplus of $700 million in 2023-24. The forecast for 2018-19 ($500 million), 2019-20 ($700 million) and 2020-21 ($1 billion) includes rising adjustments for risk.
With oil prices still below previous levels, Alberta's resource revenues and corporate income taxes are much lower than reported in times of higher oil prices. Alberta's personal income tax revenues are only just recovering to levels reported before the decline in oil prices.
Alberta's revenues for 2017-18 are now forecast to have been stronger than the Budget estimate. Expenditures are up as well, but the size of the deficit for 2017-18 is now lower than originally estimated. Revised plans for 2018-19 and 2019-20 are similar to those projected in last year's Budget, but these projections have been extended to reach a balance in 2023-24 (projections shown below do not include risk adjustments in 2018-19, 2019-20 and 2020-21). Balance is based on revenues rising at an annual average pace (from 2017-18 to 2023-24) of 5.9 per cent while expenditures grow at 2.7 per cent. Some of the rise in revenues for 2021 and beyond results from assumptions about carbon pricing as well as narrowing WCS-WTI oil price spreads when new pipeline capacity comes on stream.
Alberta's deficits are projected to decline from 2.7 per cent of GDP in 2017-18 to 2.5 per cent in 2018-19 and 2.2 per cent in 2019-20. Deficits are projected to decline more rapidly from 2020-21 to 2022-23. Over this time, eeveneues are projected rise from 13.6 per cent of Alberta's GDP in 2018-19 to 15.3 per cent by 2023-24. Expenditure growth is projected to fall short of the pace of nominal GDP and short of the benchmark sum of population and inflation. This is projected to reduce Alberta provincial expenditures from 16.0 per cent of GDP in 2018-19 to 15.1 per cent in 2023-24.
Alberta's economy contracted by almost 4 per cent per year in 2015 and 2016 as lower oil prices stalled investment activities. The Alberta Budget estimates that real GDP growth rebounded by 4.5 per cent in 2017 with broad gains across almost all sectors. Higher oil prices contributed to export growth of nearly 30 per cent. Alberta's economic outlook anticipates stable growth in real output between 2.4 and 2.7 per cent over the next 7 years. Rising prices (reaching $74/bbl by 2023-24) and oil production capacity are expected to add to Alberta's exports over the next five years. Final domestic demand is also expected to contribute to economic growth through higher non-residential investments outside of the oil sector as well as rising residential construction to meet the needs of a rising population. Alberta's unemployment rate is projected to decline in each of the next three years, but not to levels observed during the boom in oil investment (2006-2008 and 2012-2014).
Key Measures and Initiatives
The Alberta Budget prioritizes maintaining public services despite the persistent effects of lower oil prices. Efforts to diversify the Alberta economy and improve pipeline capacity are also indicated as important economic policy priorities.
The Alberta Budget implements new initiatives on priorities for economic diversification, protection of public service and returning to fiscal balance:
- Extending the Investor Tax Credit and Capital Investment Tax Credit
- Introducing a new Interactive Digital Media Tax Credit
- Creating spaces for 3,000 new technology-related post-secondary students as well as new scholarship programs
- Expanding school lunch programs
- Adding 4,500 affordable child care spaces
- Freezing non-union salaries, reducing executive compensation and seeking affordable agreements with unionized staff
- With economic growth returning, the Alberta Budget has scaled back capital expenditure estimates to $26.6 billion over 5 years - more consistent with historic investment levels
Alberta Budget 2018-19
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