LOWER OIL PRICE AND HIGHER SPENDING DRIVE INCREASE TO DEFICIT
- Lower non-renewable resource revenues and higher health and education spending increase the deficit, but most of this is absorbed by Alberta’s significant contingency buffer. The deficit could end up larger if oil prices don’t rebound, but the remaining contingency buffer will help to protect against downside risks.
- Alberta’s second quarter fiscal update and economic statement now expects a deficit of -$6.4 bn (-1.3% of nominal GDP) in FY26 compared to -$5.2 bn (-1.1%) in Budget 2025 (chart 1). The second quarter fiscal update was published on the same day as the province announced the signing of an MOU with the federal government to create the conditions for a new pacific oil pipeline.
- Total revenue was revised down by $1.2 bn compared to Budget 2025 primarily owing to lower non-renewable resource revenue (-$1.7 bn). WTI oil prices have averaged $64.50 USD/bbl through the first six months of FY26, lower than the $68 assumed in Budget 2025, and is now assumed to average $61.50 for the fiscal year. Meanwhile, lower personal income taxes (-$0.5 bn) are expected to be offset by higher corporate income taxes (+$0.2 bn), federal transfers (+$0.2 bn), and investment income (+$0.5 bn).
- Expense before contingency for FY26 was revised higher by $1.7 bn compared to Budget 2025, owing to higher program spending while debt servicing costs remain unchanged. Operating expenses by ministry were revised higher for hospital and surgical health services (+$0.4 bn), education and childcare (+$0.3 bn), and assisted living and social services (+$0.2 bn). Higher program spending is offset by a roughly equal amount in contingency funding used ($1.7 bn) with a balance of $2.3 bn set aside for FY26.
- Net debt was revised lower by $1 bn to $42 bn and is expected to be 8.7% of nominal GDP in FY26. The total capital plan was revised higher to $8.8 bn in FY26, with an additional +$0.1 bn in capital investment and +$0.05 bn in capital grants compared to the Spring budget.
DISCLAIMER
This report has been prepared by Scotiabank Economics as a resource for the clients of Scotiabank. Opinions, estimates and projections contained herein are our own as of the date hereof and are subject to change without notice. The information and opinions contained herein have been compiled or arrived at from sources believed reliable but no representation or warranty, express or implied, is made as to their accuracy or completeness. Neither Scotiabank nor any of its officers, directors, partners, employees or affiliates accepts any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents.
These reports are provided to you for informational purposes only. This report is not, and is not constructed as, an offer to sell or solicitation of any offer to buy any financial instrument, nor shall this report be construed as an opinion as to whether you should enter into any swap or trading strategy involving a swap or any other transaction. The information contained in this report is not intended to be, and does not constitute, a recommendation of a swap or trading strategy involving a swap within the meaning of U.S. Commodity Futures Trading Commission Regulation 23.434 and Appendix A thereto. This material is not intended to be individually tailored to your needs or characteristics and should not be viewed as a “call to action” or suggestion that you enter into a swap or trading strategy involving a swap or any other transaction. Scotiabank may engage in transactions in a manner inconsistent with the views discussed this report and may have positions, or be in the process of acquiring or disposing of positions, referred to in this report.
Scotiabank, its affiliates and any of their respective officers, directors and employees may from time to time take positions in currencies, act as managers, co-managers or underwriters of a public offering or act as principals or agents, deal in, own or act as market makers or advisors, brokers or commercial and/or investment bankers in relation to securities or related derivatives. As a result of these actions, Scotiabank may receive remuneration. All Scotiabank products and services are subject to the terms of applicable agreements and local regulations. Officers, directors and employees of Scotiabank and its affiliates may serve as directors of corporations.
Any securities discussed in this report may not be suitable for all investors. Scotiabank recommends that investors independently evaluate any issuer and security discussed in this report, and consult with any advisors they deem necessary prior to making any investment.
This report and all information, opinions and conclusions contained in it are protected by copyright. This information may not be reproduced without the prior express written consent of Scotiabank.
™ Trademark of The Bank of Nova Scotia. Used under license, where applicable.
Scotiabank, together with “Global Banking and Markets”, is a marketing name for the global corporate and investment banking and capital markets businesses of The Bank of Nova Scotia and certain of its affiliates in the countries where they operate, including; Scotiabank Europe plc; Scotiabank (Ireland) Designated Activity Company; Scotiabank Inverlat S.A., Institución de Banca Múltiple, Grupo Financiero Scotiabank Inverlat, Scotia Inverlat Casa de Bolsa, S.A. de C.V., Grupo Financiero Scotiabank Inverlat, Scotia Inverlat Derivados S.A. de C.V. – all members of the Scotiabank group and authorized users of the Scotiabank mark. The Bank of Nova Scotia is incorporated in Canada with limited liability and is authorised and regulated by the Office of the Superintendent of Financial Institutions Canada. The Bank of Nova Scotia is authorized by the UK Prudential Regulation Authority and is subject to regulation by the UK Financial Conduct Authority and limited regulation by the UK Prudential Regulation Authority. Details about the extent of The Bank of Nova Scotia's regulation by the UK Prudential Regulation Authority are available from us on request. Scotiabank Europe plc is authorized by the UK Prudential Regulation Authority and regulated by the UK Financial Conduct Authority and the UK Prudential Regulation Authority.
Scotiabank Inverlat, S.A., Scotia Inverlat Casa de Bolsa, S.A. de C.V, Grupo Financiero Scotiabank Inverlat, and Scotia Inverlat Derivados, S.A. de C.V., are each authorized and regulated by the Mexican financial authorities.
Not all products and services are offered in all jurisdictions. Services described are available in jurisdictions where permitted by law.