CALGARY, Feb 27 (Reuters) - Alberta, Canada's oil-producing province, projected a budget deficit of C$5.2 billion ($3.5 billion) for the 2025/26 fiscal year due to anticipated factors that could reduce government revenues and slow economic growth.
This outlook marks a significant shift in Alberta's fiscal well-being, following an expected C$5.8 billion surplus in the current fiscal year. The situation highlights the considerable uncertainty Canadian policymakers are currently navigating amidst trade tensions.
Alberta's Finance Minister Nate Horner expressed the challenges faced, stating, "How do you plan for a budget when there are so many unknowns [...]?"
The province estimated revenue for 2025-26 at C$74 billion, a decrease of C$6.6 billion from its previous forecast, mainly attributed to lower projections for oil prices and royalties.
GDP growth is expected to slow to 1.8% in 2025 and 1.7% in 2026, down from an estimated 3% growth last year. Deficits are also forecasted for the 2026/27 and 2027/28 fiscal years, at C$2.4 billion and C$2.0 billion respectively.
The annual budget document reflects projections based on a forecasted "moderate" U.S.-Canada trade conflict including potential tariffs and retaliatory measures. The budget assumes a 15% average tariff for the year on most goods and a 10% tariff on oil.
Uncertainty remains regarding U.S. tariffs on Canadian goods, with potential implications on Alberta's deficit, which could significantly rise to C$8.7 billion if a 25% tariff on non-oil goods is enforced. Conversely, with no tariffs, the projected deficit for 2025/26 would be C$2.9 billion.
Alberta, known for its oil sands, expects a wider price gap between Canadian heavy crude and the U.S. benchmark due to tariffs. The province is confident in the energy sector's ability to withstand challenges, partly due to the anticipated weaker Canadian dollar.
To counter elevated economic uncertainty, Alberta plans to double its contingency fund to C$4 billion, aiming to enhance flexibility in addressing the evolving economic landscape.