Oil-rich Alberta sees return to surplus in 2 years

Tue Feb 9, 2010 6:35pm EST
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CALGARY, Alberta (Reuters) - The oil-rich Canadian province of Alberta predicted its third-straight budget deficit on Tuesday, though it said it expects to return to surplus in two years.

The province, which had recorded 14 straight budget surpluses until falling energy prices in late 2008 slashed its take from oil and gas production, expects to post a C$4.75 billion ($4.44 billion) deficit in the 2010-2011 fiscal year that begins April 1, but lowered its forecast for the current year's shortfall to C$3.6 billion from the C$4.3 billion it forecast last November.

Ted Morton, finance minister in the Progressive Conservative government led by Premier Ed Stelmach, also said the province's economy may grow by 2.6 percent in 2010 and 2.9 percent in 2011, propelling the province back to surplus by the 2012-2013 fiscal year.

"We and the rest of the world are transitioning out of the recession," he said in his speech to the legislature. "But how long and how steep this transition will be, or whether there are still some dips ahead, no one knows for sure."

The province, one of the largest oil exporters to the United States, said it expects its revenue to rise 1.3 percent in the next fiscal year to C$33.96 billion, as its take from oil and gas and other resource industries rises 22 percent to C$7.3 billion.

The government expects oil prices to average $78.75 per barrel in the next fiscal year while Alberta natural gas prices are forecast at C$4.25 per gigajoule.

However spending will also rise as healthcare costs increase and the government spends more on education. The government expects spending to rise 4.2 percent in the next budget year to C$38.7 billion from C$37.17 billion.

Alberta government bond prices were little changed, with its benchmark 10-year bond yield at 3.921 percent, or about 54 basis points over the Canadian government yield curve.

($1=$1.07 Canadian)

(Reporting by Scott Haggett, additional reporting by Jeffrey Hodgson; editing by Rob Wilson)