Alberta’s economic outlook "dramatically improved" found the first-quarter update for the 2021-2022 fiscal year on Tuesday. The province said this confirms that Alberta’s Recovery Plan to diversify the economy and create jobs is working.

"After a historically challenging year, Alberta’s economy is already witnessing signs of recovery and growth," said Finance Minister Travis Toews. "While this indicates Alberta’s Recovery Plan is working, we know there is still more to do to create jobs and restore Alberta’s place as the economic driver of the nation."

Real gross domestic product (GDP) is expected to grow by 6.7 percent in 2021, up significantly from the budget forecast of 4.8 percent.

The deficit for 2021-22 is forecast at $7.8 billion, $10.5 billion lower than reported in the budget, while the revenue forecast is $55 billion, $11.3 billion higher than reported in the budget. Expense is forecast at $62.7 billion, up $0.8 billion from the budget.

Many economic forecasters, including the Conference Board of Canada and some of the largest Canadian banks, predict Alberta will lead all provinces in growth this year.

Toews added that Alberta’s government would continue to bring spending in line with that of other provinces, attract more investment and "get Albertans back to work." As of July, Alberta added 73,000 jobs since the beginning of the year and recovered nearly 90 percent of the jobs lost when the pandemic first took hold in the province.

Increased investment and economic activity decreased the unemployment rate to 8.5 percent, the lowest since the pandemic. Non-energy investment is forecast to grow at about five percent in 2021 and 2022 and will return to 2019 levels this year.

Finance spokesperson Kassandra Kitz said that despite these improvements in Alberta’s economy, a sizable deficit remains, and Alberta’s current fiscal situation is still unsustainable.

"It’s good to see the deficit moving in the right direction," said Alberta CTF Director Kevin Lacey, who points out that increased revenues are the major reason for the improved fiscal situation in this fiscal update.

The province maintains that three fiscal anchors guide decision-making, according to Kitz.

  1. Keeping net debt below 30 percent of GDP.
  2. Aligning per capita spending with comparator provinces.
  3. Setting a time frame for balancing the budget once the government has a clear picture of the long-term global impacts of the pandemic.

Alberta will pay $2.6 billion in debt servicing costs this year, which is more than it spends on all but four government departments. With no debt, these taxpayer dollars could be spent on education, health care and other public services.

Taxpayer-supported debt is forecast at $105.7 billion on March 31, 2022, which is $4.9 billion lower than estimated in the budget. And, the net debt-to-GDP ratio will be an estimated 19.6 percent at the end of the fiscal year, well below the province’s goal of 30 percent.

"While the recent increase in energy prices is encouraging, Alberta’s government is aware the situation can change rapidly, and the year is far from over," said Kitz. There have been dramatic fluctuations over the past year and a half. Instead of relying on volatile resource revenue, the government must control spending.

Oilsands production has risen more than eight percent in the first half of the year, with a quick rebound in bitumen output and drilling activity in June and July – exceeding 2019 levels.

With rising commodity prices, Canadian oil and gas are expected to generate $141 billion in revenue this year, just shy of 2014 levels, according to ARC Energy Research Institute. Post-tax cash flow levels are also projected to hit an all-time high of $75 billion because of reduced costs and higher production levels.

The institute predicted 4,245 oil and gas wells would be drilled this year, or 40 percent more than 2020 levels. The Canadian Association of Energy Contractors also reported 144 drilling wells were active a month ago in Western Canada, compared to only 27 in 2020.

"The customer mood has improved dramatically," said Total Energy Services CEO Dan Halyk to the Edmonton Journal. "It’s not like the good old days, yet, of 2014, but … the fundamentals look pretty good." He added that demand for drilling continues to rise.

Domestic and International oil exports from Alberta are also on the rise in 2021. Compared to the first halves of 2019 and 2020, exports rose 1.7 percent and four percent, respectively. ATB also reported that global crude oil exports from Alberta were up $9.7 billion, or 36.8 percent, over the first half of 2021.