The $24.2-billion budget deficit is equivalent to roughly 8.1 per cent of the province’s GDP, making it the largest budget shortfall in the province dating back to the 1980s, according to BMO Capital Markets research.
By contrast, Saskatchewan also released a fiscal update Thursday showing a $2.1 billion deficit for the fiscal year, which amounts to 2.9 per cent of that province’s GDP.
Many economists had predicted Alberta’s economy would face one of the most severe challenges in the country following the pandemic but experts now say the deficit numbers in Alberta, Canada’s largest oil producing province, dwarf larger provinces when adjusted for population.
If Ontario, with 3.5 times Alberta’s population, had posted a similar deficit in its fiscal update, Canada’s most populous province would be forecasting a budget deficit of $88 billion, said Jack Mintz., University of Calgary School of Public Policy president’s fellow.
But Ontario announced on Aug. 12 that its budget deficit for the year is projected to jump to $38.5 billion, or about 4.5 per cent of its GDP.
As a result of multiple years of budget deficits and an expectation of further deficits to come, Mintz said Alberta’s overall debt and net debt figures are rising at a concerning rate.
“If you look at net debt, Alberta is now 20 per cent of GDP, which is still significantly lower than Quebec and Ontario and the Atlantic provinces but it may start now getting higher than Saskatchewan,” Mintz said.
“That net debt number is going to keep rising for a number of years,” he said, adding that as net debt rises the bond yields Alberta’s government will need to pay to finance its spending will rise, too.
The fiscal update tabled in Alberta’s legislature Thursday shows Alberta’s net debt is now expected to jump by 40 per cent, or $26.7 billion, to reach $66.9 billion by March 31, 2021.
The province’s total taxpayer supported debt is growing to $99.6 billion at the same time.
“Nearly all of government’s revenue streams have been negatively impacted by the COVID-19 pandemic and the global oil price crash, with total revenue forecast to be $38.4 billion, $11.5 billion lower than estimated,” Alberta Finance Minister Travis Toews said in the province’s Legislature on Thursday.
