Despite positive second quarter results, declining oil prices require government to be diligent in fiscal planning.
Oil prices continued to slide this week, with West Texas Intermediate (WTI) closing at $74.09 US per barrel yesterday. With ongoing uncertainty with global prices, the Prentice Government continues to be focused on making decisions based on sound, conservative fiscal principles.
“We will keep the budget balanced this year through discipline and careful financial management. With lower oil prices forecast for the second half of the year, we will make the fiscally responsible decisions to keep government operating in the black while addressing infrastructure needs as Alberta continues to grow.”
~ Jim Prentice, Premier
Second quarter fiscal results show a strong first six months of the 2014-15 fiscal year; however, the on-going decline in oil prices suggests this is not business as usual and government will respond appropriately.
“While we remain financially on track for this year, the recent and significant drop in oil prices reinforces the need to be fiscally prudent and responsible. We will protect our financial position and ensure we are delivering government services efficiently and effectively.”
~ Robin Campbell, President of Treasury Board and Minister of Finance
Second Quarter Results
The surplus for 2014-15 is now forecast at $933 million, down from $1.1 billion forecast at budget.
The 2014-15 revenue forecast has been updated to $45.0 billion, $637 million higher than originally estimated at budget. Total expense is now forecast at $44.1 billion, up $791 million from budget, mainly due to higher capital grants, disaster and emergency assistance and operating expense increases.
The capital plan is providing $7.3 billion for Alberta’s infrastructure, a $673 million increase from budget, primarily for additional school projects. Direct borrowing for capital purposes is forecast at $2.2 billion, $2.7 billion lower than budget, due to improved 2013-14 results and cash from 2014-15 operations.
The revised revenue forecast is based on $75 US per barrel for the remainder of the fiscal year. For the first six months, WTI averaged $100.08 but with the recent decline in energy prices is now forecast to average $88.88 for the fiscal year.
Alberta’s economy continues to grow and real GDP is still forecast to expand by 3.8 per cent in 2014. Record numbers of people are migrating to the province and Alberta continues to lead the provinces in job growth this year, forecasted at 2.9 per cent for 2014 and 2.0 per cent for 2015.
2014-15 Second Quarter forecast ($ millions)
|Full year forecast||Budget 2014-15||Q2 Forecast||Change|
|Total RevenueNon-renewable resource revenue||$44,354
|Actual 2013-14||Q2 Forecast||Change|
(Consolidated Financial Statements basis)
|Balance sheet||2013-14 Year End||2014-15 Forecast||Change|
|Heritage Fund and endowments||$18,562||$19,013||+451|
|Capital Plan||Budget 2014-15||Q2 Forecast||Change|
|Capital Plan spending||$6,599||$7,272||+673|