Alberta needs to rethink how to approach resource revenues: Trevor Tombe
Alberta’s finance minister says he’s confident his oil-rich province is in strong shape to resist entering a potential recession next year, despite economic pressures like high inflation, rising interest rates and a volatile global economy.
“Even in Canada, there's some expectation that we may go into a recession through a couple of quarters in 2023. I'm quite confident Alberta will not,” Travis Toews said in a Friday interview with BNN Bloomberg.
“We think we're very well positioned to deal with these global economic headwinds.”
Toews made the comments a day after a fiscal update lowered the province’s budget surplus forecast by almost $1 billion, down to $12.3 billion from the $13.2 billion figure that was estimated in August.
Alberta is not immune to economic factors like inflation, economic effects from the war in Ukraine and supply chain challenges, Toews said. While the province has lowered its real GDP growth projections, Toews said Alberta’s financial outlook is “nothing near recessionary” and he expects the economy to grow “quite strongly.”
The province’s smaller surplus figure presented Thursday reflected a $2.5 billion spending increase. It also set aside $2.8 billion over the next three years to pay for a slate of inflation relief measures announced by Premier Danielle Smith this week that are aimed at helping residents weather higher prices.
Those measures include a six-month suspension of the provincial fuel tax and payments that will go to parents and seniors.
Some economists have questioned whether the tactic of making direct payments to residents could contribute to worsening inflation – a consideration Toews said the government wrestled with before deciding to roll out the targeted supports to people who are struggling with affordability.
“There's always a tension between providing some assistance and exacerbating inflation,” he said. “That's well understood, and we certainly wrestled with that piece as we developed this programming.”
Toews noted that much of the inflation relief will come from the tax cut, and said the payments to residents will be targeted and income-tested.
“We believe by targeting these payments to those who are going to be in need, it will have less of an inflationary impact,” he said.
Toews said Alberta’s spending priorities will include paying down debt and putting money towards the province’s Heritage Savings Trust Fund, which goes towards government programs. Reducing the tax burden is also a priority, Toews said, ruling out an immediate change like introducing a provincial sales tax.
“Our focus will be on delivering efficient, effective government and ensuring that we have the most preferential tax environment,” he said.
- With files from Bloomberg News and The Canadian Press