Why Alberta's path to recovery is so dependent on COVID-19 vaccine
EDMONTON -- Budget 2021 predicts Alberta's economy will return to pre-pandemic levels by 2022 – if one thing goes according to plan.
The estimate is earlier than the government was forecasting even six months ago, but it remains contingent on a smooth COVID-19 vaccine rollout to bolster consumer activity, employment, and tourism and oil revenues.
Thursday's budget – the third released by Jason Kenney's United Conservative government – predicts employment will tick up four per cent over the fiscal year, and more than two per cent in each 2022 and 2023.
Total revenues are expected to ring in 3.3 per cent higher than in 2020 at $43.7 billion, partially because of the resulting increase in personal income tax.
The budget also outlines an 8.2-per cent jump in retail sales, counteracting a fall of nearly seven per cent the year before, and similar-sized spikes in the following years.
After contracting 7.8 per cent last year, real GDP is expected to grow 4.8 per cent in 2021.
"As vaccines roll out, optimism and economic projections are improving," Finance Minister Travis Toews told media.
KEY FACTORS: VACCINE SUPPLY, UPTAKE, AND EFFECTIVENESS AGAINST VARIANTS
Although COVID-19 vaccines offer hope, the Alberta government notes that widespread immunization is months away – fall, at the earliest, according to the province's current immunization program.
And, as the budget recognizes, vaccine supply could be delayed, prompting a third serious wave of COVID-19 infections and restrictions.
Or, public uptake could be slow. Or, Albertans could be resistant altogether.
Or, new variants of the disease could prove a threat unrivalled by available vaccine products.
Economies across the globe face the same possibilities.
Budget 2021 outlines two possible scenarios depending on vaccine reception.
IF VACCINE UPTAKE IS LOW
If vaccine distribution was delayed by one year, Budget 2021 estimates global oil demand recovery could be disrupted.
Assuming the benchmark price West Texas Intermediate falls in 2022 to 2020 levels around US$39/bbl, generating less resource revenue, Alberta's deficit would increase to $20.1 billion next year.
Real GDP would fall 2.1 per cent to $7.7 billion. Taxpayer-supported debt would climb from the current projected $132.5 billion to $141 billion.
Employment by 2024 would be 1.3 per cent lower than the 2021 forecast.
IF VACCINE UPTAKE IS HIGH
If either public health measures or vaccines are more successful at controlling the pandemic, Alberta says WTI could increase to US$64.50/bbl by 2023‑24, US$8/bbl higher than the baseline forecast.
In this scenario, interest rates would increase earlier, Canada's dollar would strengthen, and real GDP would shoot up to over $15 billion by 2024.
Taxpayer-supported debt would only reach $121 billion.
Like the last year, the Alberta government can't say which will happen.
"While it is critical that the federal government manages the crisis and ensures support is provided where it is needed, a plan is also needed for Canada’s economic response as the country looks past COVID‑19," the provincial budget reads, ringing parallel to statements by Premier Jason Kenney that Ottawa has not done enough to secure vaccine product for Canada.
UNPREDICTABLE, VOLATILE, CHALLENGING
The impact of vaccine and COVID-19 is clearly visible across every layer of Budget 2021.
Alberta's health budget – always the largest single expense – accounts for a record $24.1 billion this year, receiving a nearly $900-million boost on top of a separate $1.25-COVID-19 contingency fund. From that will come an unknown amount related to distributing vaccine across the province – a cost to be split with pharmacies and physicians who come online to administer shots.
Another $1.1 billion is earmarked for a COVID-19 economic recovery plan that will receive hundreds more millions of dollars in 2022 and 20223.
Alongside the word "vaccine," the words "difficult," "volatile," "unpredictable," "unprecedented," and "challenging" coat both the text and the tone of Budget 2021.
"We live in a world of much economic uncertainty. This past year has demonstrated the amount of uncertainty a province can face," Toews commented.
With files from CTV News Edmonton's Bill Fortier