Alberta slashed its deficit forecast for the current fiscal year by 68 per cent as surging oil prices drive economic growth in the western Canadian province. 

The shortfall is now estimated at $5.8 billion (US$4.5 billion) for the year ending March 31, $12.4 billion lower than in the original budget, according to the province’s fiscal update released Tuesday. 

Holder of the world’s third-largest oil reserves, Alberta has seen a rising windfall from oil royalties this year after the pandemic curtailed oil demand in 2020, prompting oil sands producers to slash production.

The province’s revenue of $57.9 billion will exceed the original forecast by $14.2 billion. Expenses also rose by $1.8 billion from the previous forecast to $63.7 billion after a $1.4 billion provision was added for potential crop insurance indemnities because of drought conditions this year. 

After contracting 7.9 per cent last year, the province’s economy will grow 6.1 per cent in 2021. Oil and gas investment, which plunged 37 per cent in 2020, will rise back to 2019 levels by next year, reaching $26 billion. 

• Deficits will narrow to $3.3 billion in the 2022-2023 fiscal year, and to $2.3 billion in 2023-2024.
• Taxpayer-funded debt will reach $101.6 billion by March 31, $9 billion less than forecast earlier.
• U.S. oil prices will average US$70.50 a barrel in 2021-2022, US$24.50 more than estimated in original budget.
  • West Texas Intermediate will drop to U$64 a barrel in 2022-2023 as global demand moderates and supply rises
• Heavy Canadian crude’s discount to WTI to average US$14.40 a barrel, US$1.10 wider than in first quarter estimate, as high natural gas prices make refining high-sulfur crude more expensive