The Government of Alberta’s second quarter financial outlook is a bit more optimistic than the spring budget.
The deficit is projected at $10.8 billion, a $78 million decrease from the first quarter update, but up from the spring budget, which projected the deficit at $10.1 billion.
Despite the overall deficit, Finance Minister Joe Ceci is predicting a more optimistic future for Albertans, opposition Wildrose – including Barrhead-Morinville-Westlock MLA Glenn van Dijken – are concerned about government spending and investor confidence.
Alberta’s economy is expected to grow by 2.3 per cent in 2017 after two years of shrinking and Ceci says that the downturn has been deeper than the government previously thought. The growth will be supported by small improvements in oil prices, a rebound in oil production, investments in public sector infrastructure and wildfire reconstruction.
This year the economy shrunk by 2.8 per cent, due to the effects of the Fort McMurray wildfire.
“The province’s economy is now showing signs of stability,” Ceci said. “Many major economic indicators are levelling off and business output is slowly improving.”
Government revenue is predicted to increase to $42.7 billion, which is $1.3 billion higher than estimated. This is primarily due to increases to federal transfers, investment income and non-renewable resource revenue.
“Even though we are seeing increase in revenue – we have seen the revenue has increased significantly – all of the resource revenue is up in their forecasts and yet we have a government that finds ways to spend more,” van Dijken said. “It’s nice to see that we have the revenue increases but yet our deficit and debt continues to grow. $10.8 billion is a very significant concern.”
The Wildrose MLA also said he’s concerned that if the government doesn’t get spending under control, a debt crisis is looming.
Government operating expenses have increased by a total of $556 million from the spring budget. This includes increases to support programs, such as Assured Income for the Severely Handicapped (AISH), which saw a second quarter increase of $100 million.
The province managed to add 25,000 jobs from July 1 to Sept. 30, which includes 18,000 created due to increased drilling in the oil and gas sector and 3,000 in construction.
These gains were counteracted by job losses in the service industry with 7,500 lost in finance, insurance and real estate, 6,300 lost in information and culture and 2,600 in health care and social assistance.
The labour market is predicted to slowly increase with a forecast of 1.2 per cent growth.
But despite the predicted growth, unemployment remains high at 8.5 per cent and is expected to remain above 8 per cent for the remainder of the year. It is forecast to slide down to 7.8 per cent in 2017.
Albertans’ total earnings have also decreased due to overall economic weakness. A reduction in overtime hours and a shift from full-time employment to part-time employment will affect Albertans’ wallets. Average weekly hours worked this year will decrease by over 2 per cent and average weekly earning have fallen by 2.6 per cent in 2016, which was more than projected in the spring budget.
This has cut household income by 3.5 per cent in 2016 but that is predicted to improve to 2.4 per cent in 2017.
Government debt servicing costs have also increased to $1.024 billion in the second quarter update.
“Our debt servicing costs have increased again and these are real costs that come out of other programs,” van Dijken said. “So as we’ve grown that, we have to start to recognize that we have to start to pay that with increased taxes or decreased services down the line. As taxes continue to go up, investor confidence goes down.”
By the end of the year the government debt is projected to hit $31.2 billion. The government plans to balance the books by 2024.