UPDATE 1-Canada's Alberta expects surplus this year despite low oil

Tue Feb 24, 2015 2:19pm EST
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By Scott Haggett

CALGARY, Alberta Feb 24 (Reuters) - Alberta, the largest oil exporter to the United States, said on Tuesday it still expects to end the current fiscal year in surplus but warned the full impact of lower crude prices won't be felt until the next fiscal year.

In its third-quarter budget update the Canadian province said it expects to post a C$465 million ($368.9 million) budget surplus for the 2014/2015 fiscal year that ends on March 31.

That is down from an initial estimate of a C$1.09 billion surplus but confounded warnings from Alberta's premier last month that low oil prices could see the province post a C$500 million deficit for the year.

"Pressures on the province's fiscal position will intensify in the coming months as the full effect of the decline in energy revenues is felt," Nick Exarhos, an economist at CIBC World Markets said in a note to clients. "Nevertheless, the update does highlight that the province will face these looming challenges from a stronger position than might have been expected just a month or two ago."

Alberta relies on payments from its oil and gas sector to fund about a fourth of its annual budget. With oil prices down by more than half since June, the province's finance minister warned that the next fiscal year, beginning April 1, will see a larger impact from the drop in oil.

"The revised forecast for 2014/2015 shows declining resource revenue due to plunging oil prices," Finance Minister Robin Campbell told reporters. "However the full impact won't be felt this fiscal year but will be felt for budget (year) 2015."

While expected revenue of C$44.75 billion is nearly C$400 million higher than its budget forecast on a higher tax take, payments from the non-renewable resource sector are seen at C$8.71 billion, C$503 million less than expected due to lower oil prices. ($1 = C$1.2605) (Reporting by Scott Haggett; Editing by James Dalgleish)