Alberta Budget 2025: Province Shifts from Surpluses to Deficits Amid Economic Uncertainty

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Alberta's economy is facing a significant shift as the province moves from a period of budget surpluses to deficits, with the latest fiscal blueprint forecasting three consecutive years of red ink. The change is largely attributed to a combination of factors, including a dip in oil prices, a bigger contingency fund, and the impact of US tariffs on Canadian goods. Finance Minister Nate Horner's new budget, released on Thursday, predicts a deficit of $5.2 billion for the upcoming fiscal year, with the shortfall expected to continue over the next two years, albeit at a lower rate of $2.4 billion and $2 billion, respectively.

The province's reliance on volatile commodity prices, particularly oil and gas, has long made its budgets notoriously unpredictable. The current fiscal year, which ends next month, is expected to yield a surplus of $5.8 billion, but the new financial plan is more gloomy, with a steep $4.4-billion decline in resource revenue forecast due to a dip in benchmark oil prices. The West Texas Intermediate (WTI) crude oil price is expected to average US$68 a barrel, down $6 from the current year, resulting in a significant reduction in government revenues. Every $1-a-barrel increase in oil prices adds $750 million to government revenues, highlighting the oil sector's substantial impact on the province's finances.

The budget also anticipates a decline in income tax revenue, down by about $600 million, due to the fallout from tariffs, reduced corporate profits, and a $1.2-billion personal income tax cut. The province's economy is forecast to grow by 1.8 per cent this year, a slower rate than in 2024, with the addition of 48,000 new jobs and an overall employment growth of 1.9 per cent. However, the jobless rate is expected to increase, averaging 7.4 per cent, amid continued population growth. The economic uncertainty surrounding the US tariffs has introduced a significant level of unpredictability, with the province's outlook dependent on the extent to which the tariffs are implemented.

A list of key budget highlights includes: * A deficit of $5.2 billion for the upcoming fiscal year * A decline in resource revenue of $4.4 billion due to lower oil prices * A decrease in income tax revenue of $600 million * An economic growth rate of 1.8 per cent for the year * The addition of 48,000 new jobs and an overall employment growth of 1.9 per cent * A jobless rate averaging 7.4 per cent. The province's fiscal framework requires balanced budgets unless exceptions are made, such as the steep revenue drop expected this year. The government must return to surplus territory within three years of recording a deficit, prompting concerns about the province's ability to manage its finances effectively.

The budget has been described as a "realistic take" on the province's economic situation, given the numerous uncertainties and challenges it faces. The Calgary Chamber of Commerce CEO, Deborah Yedlin, noted that the budget is a necessary response to the current economic conditions, while the Business Council of Alberta's director of policy and economics, Alicia Planinci, highlighted the need for conservative assumptions and cautious spending. As the province navigates this period of economic uncertainty, it remains to be seen how the government will balance its fiscal responsibilities with the need to support the economy and maintain essential services.