Alberta is experiencing its weakest recovery from recession in the province's history, but the UCP government says the economy is showing some positive signs going into 2020 and oil and gas investment could finally turn a corner.
The provincial government released its 2020 budget Thursday. The budget outlines a $6.8-billion deficit for the 2020-21 fiscal year, shrinking to $2.7 billion next year and giving way to a $700-million surplus in 2022-23.
Revenues for 2020 are estimated at $50 billion, rising to $54 billion next year and $58.1 billion the following year. Taxpayer-supported debt is expected to hit $76.9 billion this year, $82.9 billion next year and $87.8 billion in 2022-23.
Finance Minister Travis Toews said he's optimistic about 2020 and described the projections as “credible but cautious.”
“In spite of the fact that we are projecting an increase in revenues ... we are not predicting a boom time in the next two years,” he said.
GDP growth that nearly flatlined in 2019 should give way to 2.5 per cent growth in 2020, according to the budget. The government is banking on Line 3 coming online in 2021, providing more pipeline capacity and allowing higher oil production.
The budget is based on WTI oil prices of $58 this year, and the province expects to add 170,000 barrels per day to its production.
It also expects oil and gas investment to turn around in 2020, although investment will still be far below 2014 levels.
Some of that investment includes previously announced investments such as the $3.5-billion Heartland Petrochemical Plant and a $4.5-billion polypropylene plant in Sturgeon County.
'Gradual' job growth
While Alberta's unemployment rate remains higher than seven per cent, the UCP government expects it to fall gradually to 5.1 per cent by 2023.
Toews said the unemployment rate remains “stubbornly high” and the government will be putting “even a finer focus on job creation going forward.”
“We will continue to take a broad based approach, ensuring we have the most competitive business environment possible, because we know this: that it's really the private sector, it's individuals and businesses, that invest in the province and create long-term job opportunities for Albertans,” he said.
Toews said he is confident the unemployment rate will gradually decline as additional investment materializes.
The government's employment projections are an outlier. The budget notes the Conference Board of Canada projected Alberta's unemployment rate to hover around 7.7 per cent by 2023, while Stokes Economics predicted 5.9 per cent. However, Toews said he has confidence in the government's numbers and pointed to the government's track record of accurate employment predictions.
Holding the line on spending
While the 2019 budget saw deep cuts to some provincial departments, 2020 holds the line on spending for most ministries.
Toews said while cutting across the board would have made his job easier, it wasn't in the best interests of Albertans.
“Quite frankly, that would have created additional hardship for Albertans that we wanted to avoid if at all possible, and that's why we took an awful lot of time over the summer and fall and in fact have re-evaluated our plan now to really bring a surgical approach to spending reduction in this province,” he said.
However, if revenues don't reach what the government has predicted, he warned cuts could be in the wind.
The province plans to maintain its spending on health care in 2020 at $20.8 billion, as well as education at $8.3 billion.
The Ministry of Advanced Education has budgeted $5.1 billion, down from a forecast of $5.5 billion in 2019.
For the first time, the provincial government has built into the budget a section demanding money from the federal government.
The section takes aim at the federal Fiscal Stabilization Program, which exists to compensate provinces that experience bad economic shocks. The program caps payouts at $60 per capita, though, meaning although provincial revenues in Alberta fell by nearly $7 billion in 2015-16, the province only received $251 million in stabilization funds.
Toews said Alberta is requesting $2.4 billion in back payments under that program – money the province would have received if there was no cap in place.
He called the request “modest" given Alberta's contribution to confederation.
The province is introducing two new taxes in 2020. The first is a 20-per-cent tax on vaping products, which the province expects will generate $4 million this year and $8 million next year.
The second is a four-per-cent tourism levy on AirBnBs and other online homesharing sites. The levy already applies to hotels and motels, and the province expects the extension of that levy to bring in $3 million this year and $4 million next year.