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Alberta budget

Alberta: Mid Year Fiscal Update 2024 - Mo’ Money, No Problem

November 21, 2024
Randall Bartlett, Senior Director of Canadian Economics • Kari Norman, Economist • LJ Valencia, Economic Analyst

The Government of Alberta had a lot of good news to deliver in its Q2 Update, with its projected budget surplus for the 2024–2025 fiscal year (FY2025) being much larger than expected in Budget 2024. It is now anticipated to come in at $4.6B this year, up from $0.4B in the budget plan and $2.9B in the Q1 Update.

Revenues were revised substantially higher than projected in the budget, largely on the back of stronger bitumen royalites (up $3.1B to $15.6B) and, to a lesser extent, higher personal and corporate income tax revenues (up $0.9B and $0.3B, respectively) due to population and employment gains. But in contrast to Ontario’s and Quebec’s fall updates, there was no mention of greater revenues due to the federal government’s increase in the capital gains inclusion rate.

Operating expenses moved higher (up $1.2B to $61.3B) on broad-based spending related to health, seniors and communities, and education services. Notably, nearly $0.8B in additional spending was used for disaster and emergency assistance, primarily for fighting wildfires. However, projected debt servicing costs were down $0.2B from the budget, mainly due to lower required borrowing.

The much-improved deficit outlook for FY2025 should lead to lower borrowing requirements and, hence, a much-reduced net debt-to-GDP ratio than expected in the spring (to 8.2% from 9.2% previously). This has helped to maintain Alberta’s position as the province with the strongest fiscal position in the Federation, and gives the Government of Alberta ample room to strategically prefund future debt maturities in FY2026.

But risks to Alberta’s latest forecast update are largely to the downside. The expected average WTI oil price for FY2025 is unchanged from Budget 2024 at US$74/barrel (but down from $US76.50/bbl in the Q1 Update), a level the light, sweet crude benchmark hasn’t closed at since early October. Further, if the federal government’s plans for newcomer admissions comes to fruition, population growth could be much weaker than expected. Finally, while we expect some exemptions to be made for energy imports to the US, the threat of tariffs looms large over the economic outlook.

NOTE TO READERS: The letters k, M and B are used in texts, graphs and tables to refer to thousands, millions and billions respectively. IMPORTANT: This document is based on public information and may under no circumstances be used or construed as a commitment by Desjardins Group. While the information provided has been determined on the basis of data obtained from sources that are deemed to be reliable, Desjardins Group in no way warrants that the information is accurate or complete. The document is provided solely for information purposes and does not constitute an offer or solicitation for purchase or sale. Desjardins Group takes no responsibility for the consequences of any decision whatsoever made on the basis of the data contained herein and does not hereby undertake to provide any advice, notably in the area of investment services. Data on prices and margins is provided for information purposes and may be modified at any time based on such factors as market conditions. The past performances and projections expressed herein are no guarantee of future performance. Unless otherwise indicated, the opinions and forecasts contained herein are those of the document’s authors and do not represent the opinions of any other person or the official position of Desjardins Group.