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Canadians get an updated picture of the country's resource economy in two key budgets this week, and it's certain to be bleak given the damage from the oil slump.
Both Alberta and Newfoundland and Labrador release their budgets Thursday. Both will underscore the hit from the collapse in crude prices and, as BMO Nesbitt Burns put it, "they're not going to be pretty."
In October, noted BMO senior economist Robert Kavcic, Alberta had assumed a $5.4-billion deficit for fiscal 2016-17, but that came with an expected West Texas intermediate oil price of $61 (U.S.) a barrel. Oil price assumptions will now have to be lower, he added, which means a hit to revenues, as well.
"While the weaker Canadian dollar will cushion the hit somewhat, published budget senstivities suggest that combination could still lead to a revenue shortfall of around $3-billion, all else equal, and the Finance Minister has indeed hinted at a deficit of roughly $10-billion (close to 3 per cent of GDP)," Mr. Kavcic said, adding that the government is certain to opt for stimulus over austerity.
Then there's Newfoundland and Labrador, whose fiscal standing is "the most critical in Canada," Mr. Kavcic added. The province's deficit had been on track to swell to $2.4-billion in fiscal 2016-17, and near $2-billion a year later. But again, those numbers were based on higher oil price assumptions.
"Suffice it to say that some tough decisions will have to be in this budget, the first under the newly elected government, in order to right the fiscal ship," Mr. Kavcic said.