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February 28, 2020ALBERTA BUDGET 2020-21 Alberta's 2020-21 Budget was released with a plan for a $6.81 billion deficit in 2020-21, following a $7.54 billion deficit in 2019-20. The Budget anticipates maintaining expenditures at about the same level in each of the next three fiscal years, while revenue growth ($4 billion/year) allows Alberta to return to surplus in the 2022-23 fiscal year. Alberta's Budget incorporates adjustments for crude-by-rail payments and contingencies into its expenditure outlook.
Alberta's fiscal plan is similar to the one tabled in the post-election Budget for 2019-20 (October). Planned expenditures (all years) and revenues (all years except 2020-21) are higher than previously projected.
At $7.54 billion, Alberta's deficit for 2019-20 was smaller than projected. The deficit for 2020-21 is now anticipated to be larger ($6.81 billion)than the previous estimate. The projected deficit in 2021-22 and surplus in 2022-23 are in line with the 2019-20 Budget fiscal plan.
Measured as a share of Alberta's GDP, the footprint of the provincial government is low. Alberta's provincial government revenues amounted to 14.5 per cent of GDP in 2019-20. Revenues as a share of GDP are expected to decline to 13.9 per cent of GDP in 2020-21 before rising in each of the next two years to hit 14.4 per cent of GDP in 2022-23. Alberta provincial government expenditures amounted to 16.3 per cent of GDP in 2019-20. After holding expenditures steady over the next three fiscal years, the Alberta government will have reduced provincial spending to 13.9 per cent of GDP.
Alberta's forecast deficit for 2019-20 amounts to 2.2 per cent of provincial GDP. The deficit narrows to 1.9 per cent of GDP in 2020-21 and to 0.7 per cent of GDP in 2021-22. By 2022-23, the Alberta government projects a surplus amounting to 0.2 per cent of GDP.
Alberta's debt-to-GDP ratio (taxpayer supported debt) is projected to rise from 19.4 per cent in 2019-20 to 21.3 per cent in 2020-21 and to 21.7 per cent in 2021-22. Alberta's debt-to-GDP ratio is projected to remain at 21.7 per cent in 2022-23.
After the decline in oil prices in 2014, Alberta's economy has experienced a slow recovery. Alberta's economy has taken almost 5 years to return to its pre-recession peak - longer than observed after downturns in 1982, 1986 and 2009. Alberta's real GDP growth is expected to recover in 2020, with growth of 2.5 per cent, following an estimated 0.4 per cent growth in 2019. The rebound in growth for 2020 is expected to come from rising oil exports and capital spending. Real GDP growth is further projected to accelerate to 2.8-2.9 per cent over the 2021 to 2023 period.
The Alberta Budget assumes that the reduction in corporate tax rates announced in the 2019-20 Budget will increase investment, employment and household consumption. After the initial reduction of one percentage point on July 1, 2019, further reductions of one percentage point are scheduled on January 1 of 2020, 2021 and 2022. Rising investment is projected to lift real GDP by 0.3-0.4 percentage points annually and to reduce the Alberta unemployment rate to below 6 per cent by 2022.
The Alberta Budget assumes that oil prices will average $58 for 2020-21, rising to $63 by 2022-23 (WTI, stated in US dollars per barrel), but with a rising differential between the US benchmark and the Western Canadian Select price. Higher global oil prices come from assumptions of strengthening demand (mostly emerging markets) and slower growth from US shale oil producers.
The Alberta Budget notes that the outlook is sensitive to risks around oil prices, trade tensions, global geopolitics, development of energy projects and the emerging coronavirus (COVID-19).
Key Measures and Initiatives
The 2020-21 Alberta Budget continues corporate tax reductions announced last year. This year, Alberta's government focuses on efforts to stabilize provincial expenditures and bring the cost of public services in line with national averages over the next three years. Both compensation rates and staffing levels are to be brought in line with similar provinces. Full-time equivalent employment is slated to be reduced - mostly through attrition - by 0.7 per cent for the broader public service (including schools, universities, colleges, hospitals), including a 2.5 per cent reduction for Alberta government departments.
The Alberta Budget also outlines reforms to education and post-secondary education funding as well as police funding. There are further efforts to find more cost-effective service delivery including public-private partnerships, procurement transformation and formalized program review processes.
In addition to expenditure management, Alberta's Budget focuses on modernizing the regulatory environment, reducing red tape and eliminating internal trade barriers to help business expansion.
Alberta Budget 2020-21
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