The province is prepared to take every possible step to protect Albertans from a coming “terrible economic storm,” Premier Jason Kenney said Thursday — but for many, it won’t be enough.
The province is prepared to take every possible step to protect Albertans from a coming “terrible economic storm,” Premier Jason Kenney said Thursday — but for many, it won’t be enough.
“We cannot save every business that is going to be distressed right now,” Kenney said during a Facebook livestream. “What makes me emotional and gives me an enormous amount of anxiety is … realizing there is not enough fiscal power in the government in Alberta to insulate everyone from the economic adversity we are going through.”
Kenney said Alberta is likely to hit a deficit somewhere in the range of $20 billion this fiscal year — an entirely reasonable figure given the situation the province now finds itself in during the pandemic, said University of Calgary economist Trevor Tombe.
But though COVID-19 has presented new challenges for Alberta, Tombe said it’s important to remember that the province was already experiencing a significant period of no growth.
“Basically, Alberta has been experiencing a rising level of debt-to-GDP [gross domestic product] since the financial crisis,” he said, referring to the ratio between what a government owes to its economic output. High levels of debt-to-GDP mean countries and provinces are not generating enough money to pay off their debts.
“In 2007, we had net assets equivalent to 15 per cent of GDP, where we actually owned more than we owed — we had negative net debt. Then the financial crisis turned the corner, and our financial situation has been deteriorating ever since.”
Accumulating debt for years
Alberta has been accumulating debt for well over a decade now, Tombe said. He estimates the coming fiscal year could see deficits hit somewhere between $15 and $20 billion.
“So you have to borrow to cover that, when you’re spending more than you’re bringing in,” Tombe said. “In addition, the government borrows for capital investment projects, and that could be about $3 billion to $4 billion more, and that’s not counted as a deficit that still needs to be borrowed.”
On top of that, Tombe said it’s possible that the economy could shrink.
Projections vary, but taking a real gross domestic product figure at a rate of eight per cent — paired with a drop in oil prices — could mean a shrinkage in the entire total income in the province by about 15 to 20 per cent.
Put it all together, and Tombe said it would roughly double Alberta’s