Strong oil prices help in provincial fiscal update

·3 min read

A strong finish for oil prices this last fiscal year has Alberta’s deficit lower than predicted, although the province is still suffering through one of the worst financial years on record.

On Wednesday, the Alberta provincial government released the end-of-year fiscal update for 2020-21, showing a deficit of $16.9 billion, some $3.2 billion lower than forecast at the end of the third quarter in February.

The increase in oil prices are a positive sign for the economy, Finance Minister Travis Toews said, after the big blow COVID-19 and the energy market collapse delivered to the province.

"Last year was very difficult for many Albertans, but the province is emerging stronger than expected," said Toews.

The fourth quarter saw an increase in oil prices, with West Texas Intermediate (WTI) averaging around US$60 per barrel between January and March, higher than what was predicted.

Toews said other industries in the province are doing well and helping increase government revenues during the pandemic.

“The forestry and agriculture industries were strong, and emerging sectors such as tech all contributed to an improved economic outcome and increase in government revenue,” said Toews.

And sectors such as tourism and the service industry will continue to bounce back after the province fully reopens, the minister said.

The growth in the financial markets helped fuel an increase in investment income for the province in the later months of the fiscal year.

Overall provincial revenue for 2020-21 came in at $43.1 billion, some $0.8 billion higher than forecast in the third-quarter financial report.

But revenue hasn’t come back to pre-pandemic levels, with $3.1 billion reported in non-renewable resource revenues for the year, which is $2 billion lower than originally budgeted and $2.8 billion lower than the 2019-20 levels.

But due to the pandemic the province had to spend $5.1 billion to fight COVID-19 and fund economic recovery. The COVID-19 spending was only a fraction of the $60.1 billion in expenses in the province, which came in $2.4 billion lower than the third-quarter forecast.

In 2021-22, around $5.52 million has been spent to date on advertising, market research, and other communication costs for COVID-19 and vaccination promotion. In 2020-21, the Alberta government spent about $14.8 million, and $1.5 million in 2019-20.

The cost of advertising for Alberta’s Recovery Plan came in at around $4.28 million for 2020-21 for advertising, market research, and other communication costs, with an additional $509,000 in 2021-22.

But despite the improvements in resource revenue, the year will still go down as one of Alberta’s worst fiscal years in this history of the province, thanks to the pandemic, oil price collapse and a gamble that didn’t pay off for the Keystone XL pipeline.

The debt for the province is currently sitting at $93 billion, with the GDP down by 8.2 per cent and unemployment hitting 11.4 per cent during the fiscal year.

Overall the province spent $1.2 billion less in operating expenses, aside from COVID-19 spending, than originally budgeted, which came from a reduction in services from the pandemic.

Finance critic for the NDP Shannon Phillips said the government is holding back money when families need support and assistance.

“Think of the suffering we could have avoided for so many families that were looking for support if we had just used the money that we were budgeted,” said Phillips.

Jennifer Henderson, Local Journalism Initiative Reporter, St. Albert Gazette

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