Alberta’s government remains hopeful in its future economic outlook, justifying more spending amid declining resource revenues in the next two fiscal years.
While fiscal year 2023/24 forecasts a budget surplus of $5.5 billion — an increase of $3.2 billion from Budget 2023 — projections for subsequent years indicate a bleaker outlook.
Admittedly, the province said volatile oil prices, continued inflation challenges and uncertainty due to slowing global growth could affect the province’s finances going forward.
While the price of West Texas Intermediate (WTI) oil is forecast to average US$79 per barrel over the course of the fiscal year, in line with the Budget 2023 forecast, that is subject to change moving forward.
Overall, Alberta’s mid-year fiscal update pegs resource revenue at $19.7 billion this fiscal year — $1.3 billion higher than the budget forecast. But they are expected to fall in subsequent years to $17.5 billion and $17.4 billion, respectively.
“Alberta continues to stand out as a leader when it comes to fiscal stability and economic resilience in the midst of so much global uncertainty,” said Finance Minister Nate Horner. The improved second quarter for this fiscal year is partially attributed to strong bitumen royalties, but also factors in higher income tax revenues.
Bitumen royalties are forecast at $14.4 billion this year — an increase of $1.8 billion from the budget, according to the government news release. Personal and corporate income tax revenue is forecast at $21.8 billion — also $1.8 billion higher than initially tabled.
“Our second-quarter fiscal update is another positive report, showing strength in Alberta’s finances and economy and positioning us for future growth and prosperity,” added Horner.
However, total revenue is expected to fall from $74.3 billion to $73.2 billion next year, with total spending rising from $68.8 billion to $71.0 billion during the same period.
According to the province, a boost in personal and corporate income tax for fiscal year 2025/26 suggests more government revenues to spend than in 2024/25 — up again to $72.1 billion.
In addition, debt servicing costs will also be higher than previous years due to higher interest rates, reinforcing the importance of the government’s commitment to balance the budget.
They maintain that future revenue outlooks and spending is indicative of their fiscal responsibility.
This is a developing story.