High energy prices will help Canada’s main oil-producing province of Alberta trim its 2021/22 budget deficit to C$5.8 billion ($4.5 billion) from the C$7.8 billion shortfall forecast in August, the government said on Tuesday.
Alberta, whose economy is closely tied to swings in global oil prices, said in a fiscal update that drilling activity and crude production had increased while business output remained solid. Personal and corporate tax revenues will rise, it added.
Finance minister Travis Toews said in a statement that the more upbeat forecast was thanks to “improved employment, solid consumer spending, residential construction and activity, and stronger-than-expected global energy demand growth – boosting oil and natural gas prices”.
After contracting 7.9% last year, Alberta’s real gross domestic product is now forecast to grow 6.1% in 2021, less than the 6.7% projected in August.
“Rising input costs, supply side bottlenecks and labor shortages in some industries are expected to restrain job gains in the near term,” the update said.
Global oil prices surged to multi-year highs in October due to tight supply and increased optimism about demand recovering from the impacts of the pandemic.
But last week concerns about a new COVID-19 variant sent oil prices sharply lower, and it remains to be seen how the spread of the variant will affect demand for crude.
Higher energy prices also prompted Saskatchewan to cut its own budget deficit forecast on Monday.
This month Canada’s two most populous provinces, Ontario and Quebec, both revised downward their own deficit forecasts, citing stronger-than-expected growth.