First Quarter report: Wildfire impact adds to economic challenges

 First Quarter report: Wildfire impact adds to economic challenges

23 August 2016

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Canada —  The Alberta government is continuing to take a cautious approach to its finances as oil prices remain low and the province deals with the cost of wildfires.

The net fiscal impact of the Wood Buffalo wildfire is forecast at an estimated $500 million for 2016-17 ($647 million in disaster relief assistance minus $452 million in federal transfers plus $300 million in lost revenue).

With this and other changes, the deficit is forecast to be $10.9 billion, $527 million higher than estimated at budget.

“In the face of the oil price collapse and the economic impact of the wildfires, our government continues to take a prudent approach, controlling spending, protecting critical public services, and taking action to create jobs and diversify our economy.”
Joe Ceci, President of Treasury Board, Minister of Finance

The revenue forecast has increased by $708 million, due largely to an adjusted forecast for the West Texas Intermediate (WTI) oil price from $42/bbl to $45/bbl and higher-than-expected federal transfers, including $452 million in disaster assistance.

While the adjusted forecast for the WTI oil price has increased modestly, the government is maintaining the full $700-million risk adjustment to account for potential oil price volatility.

Operating expenses remain flat, increasing by 0.3 per cent from budget, and total expenses are forecast to increase due largely to the Wood Buffalo Disaster Recovery Program, additional disaster assistance and capital grants.

“We are keeping government operating spending in line while protecting families from reckless cuts to vital public services. Through our Capital Plan, we continue to invest in Alberta’s infrastructure. Our commitment to support rebuilding after this year’s wildfires will help spur economic recovery in 2017, protecting thousands of jobs for Alberta families.”
Joe Ceci, President of Treasury Board, Minister of Finance

Alberta’s economy is expected to begin recovering in 2017, following a two-year recession. Real GDP is forecast to grow by 2.4 per cent in 2017, supported by wildfire reconstruction, a rebound in oil production, additional investments in public-sector infrastructure, and a modest improvement in oil prices.

Non-renewable resource revenue has been revised higher in 2016-17, due to a small increase in the WTI forecast. This helps offset weaker corporate income tax revenue, which has been brought down by wildfire disruptions and weak economic conditions.

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