The government’s economic outlook has dramatically improved over the first three months of the fiscal year, confirming that Alberta’s Recovery Plan to diversify the economy and create jobs is working.

As of July, Alberta added 73,000 jobs since the beginning of the year and has now recovered nearly 90 per cent of the jobs lost when the pandemic first took hold in the province.

Real gross domestic product (GDP) is expected to grow by 6.7 per cent in 2021, up significantly from the budget forecast of 4.8 per cent. Many economic forecasters, including the Conference Board of Canada and some of the largest Canadian banks, predict Alberta will lead all provinces in growth this year.

“After a historically challenging year, Alberta’s economy is already witnessing signs of recovery and growth. While this indicates Alberta’s Recovery Plan is working, we know there is still more to do to create jobs and restore Alberta’s place as the economic driver of the nation. We will continue to bring spending in line with that of other provinces, attract more investment and get Albertans back to work.”

Increased investment and economic activity has led to the unemployment rate falling to 8.5 per cent, the lowest since the pandemic started.

Oilsands production has risen more than eight per cent in the first half of the year with a quick rebound in bitumen output and drilling activity in June and July – exceeding 2019 levels. Non-energy investment is forecast to grow at about five per cent each year in 2021 and 2022, and will return to 2019 levels this year.

Fiscal situation

Despite these improvements in Alberta’s economy, a sizeable deficit remains, and Alberta’s current fiscal situation is still unsustainable. Alberta will pay $2.6 billion in debt servicing costs this year, which is more than it spends on all but four government departments. With no debt, these taxpayer dollars could be spent on education, health care and other public services.

While the recent increase in energy prices is encouraging, Alberta’s government is aware the situation can change rapidly and the year is far from over. There have been dramatic fluctuations over the past year and a half. Instead of relying on volatile resource revenue, government must control spending.

Alberta’s government continues to hold three fiscal anchors to guide decision-making:

1. Keeping net debt below 30 per cent of GDP.
2. Aligning per capita spending with comparator provinces.
3. Setting a time frame for balancing the budget once the government has a clear picture of the long-term global impacts of the pandemic.

Quick facts

• The deficit for 2021-22 is forecast at $7.8 billion, $10.5 billion lower than reported in the budget.
• The revenue forecast for 2021-22 is $55 billion, $11.3 billion higher than reported in the budget.
• Expense is forecast at $62.7 billion, up $0.8 billion from the budget.
• Taxpayer-supported debt is forecast at $105.7 billion on March 31, 2022, which is $4.9 billion lower than estimated in the budget.
• The net debt-to-GDP ratio will be an estimated 19.6 per cent at the end of the fiscal year, well below the province’s goal of 30 per cent.