Alberta's economy continues to shrink over uncertainty in oil market
By Staff Writer
Alberta will face two consecutive years of economic downfall owing to the collapse in the crude market. The province, which depends mainly on oil, grieves from the ongoing price fall in the global oil market. The government expects 2016 - 2017 shortfall to exceed the previous forecast in October of C$5.4 billion by nearly $5 billion.
In addition, the province expects scarcity in the fiscal year, which commences on 1 April, to be around C$10.4 billion and deficit in the present fiscal period to be C$6.32 billion. Alberta economy relies heavily on fuel revenues for government expenditures and the recent fall in crude prices have created a cavity in the capital of Alberta. The province currently anticipates the economy in 2016 to drop by 1.1%, down from a fall of 1.5% in 2015, as reported by Bloomberg.
The global oil market slumped nearly $32 per barrel in the recent times due to the oversupply from the producers and weak demand from China, the largest consumer of fuel. Experts believe that unless the OPEC countries reduce their oil production, the future of crude price remains uncertain and that the oil market will not recover from the misery.
The province trimmed its 2016 outlook for West Texas Intermediate to be $45 per barrel, lower than the October prediction of $50 per barrel. The predicted "borrowing requirements" remain unaltered from the prior outlook at C$9.56 billion. The government reduced its non-renewable sources revenue outlook in 2015-2016 to C$2.5 billion from its previous outlook by nearly C$300 million.
Joe Ceci, finance minister of Alberta, said, "This is once-in-a-generation economic challenge. Difficult times lie ahead for 2016." Health care expenses are anticipated to rise to C$18.4 billion and the net government expenditure to be at C$49.4 billion, which is less than the prior outlook by almost C$460 million.
In early February, Trudeau, prime minister of Canada, promised Alberta a sum of $700 million for infrastructure expenses. He also pledged to alter the EI system in order to boost the financial position of the workers who lost their jobs. Todd Hirsch, an economist at ATB, said that Alberta will use the funding amount of $250 million for infrastructure schemes that include boosting the Green Line in Calgary and LRT line, as reported in CTV News.
Trevor Tombe, an economics professor at the University of Calgary, said that Alberta economy is still in good form than the other Canadian provinces. He interrogated Alberta's infrastructure expenditure while at the same time advocated for the compelling need for additional capital disbursements. He added that the province must undertake serious strategies to ensure proper spending structure and taxation in the long run, CALGARY HERALD said.
The economy of Alberta, which depends heavily on revenues from oil sources, continues to shrink amid weak oil prices globally. The province is still hopeful that things will recover from the gloomy oil market over the long run.