Alberta’s NDP government is touting a slimmer deficit and employment gains as signs of stability in the province’s stuttering economy even as it concedes shaky oil prices threaten to delay a lasting recovery.
The deficit is forecast at $10.8-billion this year, according to a second-quarter fiscal update released Monday. That’s down $78-million from previous expectations but still $450-million higher than originally budgeted due to impacts of wildfires earlier this year.
Once a debt-free province, Alberta has borrowed heavily for capital projects and to finance day-to-day operations after more than two years of downturn in energy markets sapped provincial revenues. Total debt is forecast to be about $31.2-billion by year-end.
With unemployment stuck at an elevated 8.5 per cent, Finance Minister Joe Ceci on Monday acknowledged impacts of the oil crash are still reverberating through the province.
“But it’s also the case – as this update shows – that the province’s economy is showing signs of stability,” he said in prepared remarks.
The province added 25,000 mostly private-sector jobs between July and October, he said. Officials said the biggest gains were in oil and gas, with 18,000 jobs added as drilling activity accelerated.
Crude prices have strengthened since September on hopes for a deal to tackle global oversupply, but they remain well under triple-digit levels of 2014. The industry has shed tens of thousands of jobs to cope.
Alberta’s energy-dependent economy is on track to shrink 2.8 per cent this year after contracting 3.6 per cent in 2015. Growth of 2.3 per cent is forecast in 2017, down slightly from 2.4 per cent expected in the first quarter.
Business investment is forecast to fall by more than 16 per cent this year, after dropping by 23 per cent in 2015. Capital spending in the energy sector is pegged at $30-billion, about half levels in 2014.
Despite signs of optimism, some of the industry’s biggest companies remain cautious. Suncor Energy Inc. has chopped forecast spending next year by $1-billion to around $5-billion as it finishes construction of a suite of growth projects, for example.
Mr. Ceci said the province is sticking to its forecast for U.S. oil prices at $45 (U.S.) a barrel – below levels analysts say are needed to justify expansion of high-cost oil sands projects.
It has also set aside $700-million (Canadian) as a “risk adjustment” and warned that lower oil prices could further dampen growth.
He told reporters approval of Kinder Morgan Canada Inc.’s Trans Mountain pipeline expansion would bolster provincial finances and encourage companies to invest in new exploration, “which we want to see.”
A decision by the Trudeau government on the $6.8-billion plan to more than double capacity on the Pacific-bound pipeline is due by mid-December.
Crude has see-sawed ahead of a Nov. 30 meeting of the Organization of Petroleum Exporting Countries, reflecting nagging doubts over the cartel’s ability to agree on details of a proposed production cut.
Energy analysts at consultancy Wood Mackenzie on Monday said the group is unlikely to implement a significant cut as advertised, citing the reluctance on the part of key producers to rein in output and lose market share.
Without a deal, they expect global oil prices of between $40 (U.S.) and $50 to persist into next year.Report Typo/Error