Seven Burning Questions on Alberta’s Finances

What to Watch for in the Province’s Mid-Year Fiscal Update

• With Alberta set to release its mid-year fiscal and economic update for 2022–2023 (FY2023) this month, we discuss seven questions that should be top of mind for investors and policymakers.
• Government fiscal sensitivities and the strength of WTI prices alone suggest an $8‑9 billion boost to the bottom line in FY2024 versus Budget 2022. That would build on the record budget surplus already forecast for this year.
• But downside risks are mounting. We estimate that light-heavy oil price discount effects plus potential new spending could shave close to $4 billion off the bottom line next year.
• Other downside risks include capital project delays and the possibility of overestimating oil prices at a time of historic revenue sensitivity.
• Alberta’s underlying revenue trajectory and any new spending measures will impact the funds available for ambitious plans to repay $13.4 billion in debt this year.
• We suspect that markets have already priced in much of the underlying fiscal improvement, but Alberta’s fiscal fundamentals are clearly strong, and that could drive lower market supply and support spreads against Government of Canada benchmarks in the coming years.