Alberta Premier Jason Kenney is acknowledging that a prolonged economic downturn from the coronavirus outbreak would have a significant impact on the province’s economy and could imperil his government’s marquee election promise to balance the budget two years from now.
Mr. Kenney said the COVID-19 outbreak, which has now arrived in his province, has already played havoc with global markets and sent oil prices tumbling to US$42 a barrel for West Texas Intermediate. The provincial budget projected oil at an average of US$58 a barrel in the coming year and US$63 in 2022-23, which is when Mr. Kenney pledged during last year’s election to bring the province into surplus.
For every US$1 off those projections are, revenues swing by an estimated $355-million, the budget noted.
“I’ve always said that this [a balanced budget] is our strong commitment to our Albertans," Mr. Kenney said Friday at a news conference in the community of Morinville, north of Edmonton. “However, if there is a major, prolonged global downturn, that would obviously affect our plan to get to balance in that time frame.”
Mr. Kenney said it was too soon to contemplate making changes to the 2020-21 budget, which forecasts a deficit of $6.8-billion in the coming year and relies heavily on an oil rebound to turn the province’s finances around. He noted that the government typically re-evaluates its budget midway through the fiscal year and that would happen this year, as well.
The coronavirus outbreak couldn’t have come at a worse time for the province and its finances. The economic turmoil caused by the outbreak escalated just as the government had finalized its first full-year budget since taking office last year. That volatility made the budget’s projections for oil prices and other economic indicators – which were already optimistic – appear even less certain, at least in the short term.
The latest hit follows more than five years of pain that began when oil prices collapsed in 2014. Tens of thousands of Albertans lost their jobs as the province sunk into a two-year recession and the economy has yet to fully recover.
“We Albertans are not an island,” Mr. Kenney said.
“It is frustrating after five years of economic decline and stagnation, just as we were ready to see significant growth in 2020, to see this global downturn from the coronavirus.”
Mr. Kenney argued that the uncertainty justifies his government’s efforts to rein in spending with a 2.8-per-cent cut to program spending over four years. Labour groups and other critics of the government have warned that a worsening financial picture could lead to deeper cuts as the government attempts to keep deficits down.
The provincial budget has been criticized for its upbeat projections for oil prices, GDP growth and unemployment, which in many cases were outside the range projected by private-sector analysts. Missing the oil projections by even a few dollars per barrel could wipe out the projected 2022-23 surplus of $700-million if nothing else is changed.
NDP Leader Rachel Notley said she had no doubt that the government will miss its balanced budget target. However, she argued that the coronavirus isn’t the main source of Alberta’s problems.
“We know very clearly that the coronavirus is slowing down the economy across the world, but let me be very clear: Jason Kenney’s plan to balance the budget by [2022-23] was always based on a collection of fantasyland numbers. It was never real," she said in Edmonton.
“It looks to me like he’s going to try to use this particular set of circumstances as cover for the fact that he introduced a budget that was absolutely not attainable."
Alberta reported its second presumptive case of coronavirus on Friday – a man in his 40s from the Edmonton area who had travelled on business to Michigan, Illinois and Ohio.
The province’s first case was a woman in her 50s from the Calgary area who recently returned from a trip on the Grand Princess cruise ship. The Grand Princess is currently in quarantine off California after two other former passengers fell ill. One of them died.
Mr. Kenney and Ms. Notley both expressed confidence in Alberta health officials’ ability to respond to the outbreak and mitigate its impact on the province.
With a report from The Canadian Press
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