Alberta’s budget may be filled with $10.3 billion of red ink but Finance Minister Joe Ceci says it also has plenty of reasons for optimism.
Its three-year forecast offer some encouraging predictions in the outlying years.
“Now we’re seeing green shoots in our economy,” Ceci said. “They’re promising signs 2017 will be the year Alberta’s economy turns around.”
The government believes oil will sell for $68 per barrel in 2019-2020. That’s up from $55 projections for this year.
Several large oilsands projects are now coming on line. That means 300,000 more barrels per day of bitumen production by 2020.
Royalty revenue on that bitumen will more than double, going from $2.5 billion this year to $5.2 billion in 2020.
Corporate income taxes are expected to climb, from $3.9 billion to $5.1 billion.
Unemployment should drop from 8 per cent today to 6.3 per cent in 2020.
Ceci welcomes the revenue but says government’s plan also focuses on controlling the growth in spending.
“We’re going to be bending the cost curve on expenditures,” said Ceci. “So that’s how we get back to balance, spend less than population growth plus inflation.”
There are some fiscal concerns on the horizon.
Oil prices have collapsed recently. They’re sitting at $48 per barrel. That’s well below $55 predictions for this year.
Ceci says he’s not overly concerned about that. Oil prices fluctuate but he does say he’ll be watching prices very closely in the months ahead.
This economic growth is expected to put a strain on both existing and proposed pipeline capacity.
Next year, bitumen production is expected to exceed our ability to process it or export it. That means producers will have to ship more by rail, which is more expensive. As a result, Alberta oil will be about $18 cheaper than oil from other parts of the world. It’s currently about $16 cheaper.
More to come, including reaction from opposition leaders.