Wild Rose Uncertainty: Our Analysis of the Alberta Budget 2025

The province is anticipating a surplus of $5.8 billion in fiscal year 2024–25, surpassing projections from the fall fiscal update, citing higher-than-expected oil prices.
The government is now anticipating a deficit of $5.2 billion, including $4 billion set aside for contingencies, for fiscal year 2025–26, due to broader contingencies for emergencies and trade risks. Alberta’s baseline forecast assumes that Canada will face on average 15 per cent tariffs on all goods, except for energy products, which will face a 10 per cent tariff.
Further ahead, the government is projecting deficits of $2.4 billion in fiscal year 2026–27 and $2.0 billion in fiscal year 2027–28. The three consecutive years of planned deficits, which include contingencies, could pose challenges to the fiscal outlook beyond then given the province is only allowed three consecutive years of deficits.
Royalties are expected to pose the biggest challenge to the fiscal outlook, with the budget estimating a decline of more than $4 billion in bitumen royalties in fiscal year 2025–26 compared to the past fiscal year. That forecast assumes a West Texas Intermediate price of US$68, lower than our own forecast.
The hallmark policy measure announced was a new tax bracket of 8 per cent for the first $60,000 of income, which is expected to amount to a $1.2 billion cut for taxpayers.
Additional spending is broadly restrained and will be directed mostly to demographic demands on healthcare and education.
Overall, total expenses (before contingencies) in fiscal year 2025–26 are projected to increase by 3.3 per cent from the previous fiscal year, whereas total revenues are projected to decrease by 8.2 per cent.
The province’s baseline scenario still forecasts the provincial economy to grow 1.8 per cent in 2025 despite widespread tariffs, which is somewhat optimistic based on our own analysis.

Key insights

The budget makes it clear that uncertainty is the prevailing force during this budget season. Alberta opted to take a cautious approach, forecasting relatively weak GDP growth of only 1.8 per cent, similar to our own forecast despite different assumptions, and planning with additional contingencies throughout the budget years. This highlights how uncertain today’s fiscal environment is. Overall, the budget is broadly cautious, although three consecutive years of deficit could put the province in a difficult position down the road.

While the budget is prudent, tariffs could weigh on finances even more than anticipated. Earlier this month, we released our assessment of the provincial impacts of U.S. tariffs on Canadian imports, which indicates that Alberta could face stronger impacts than anticipated in the budget because of a holdback in investment in the oil sector and the province’s overall reliance on trade. The steeper impact would naturally lead to bigger deficits than anticipated and would be closer to the downside forecast presented in the budget.

Alberta’s fiscal health remains one of the strongest in Canada, after posting consecutive surpluses and with the lowest provincial net-debt-to-GDP ratio in the country. Revised estimates for fiscal year 2024–25 project a surplus of $5.8 billion, exceeding last year’s budget projection by $5.4 billion, largely due to higher-than-expected oil prices. However, recent fiscal strength offers some buffer against risks, notably potential U.S. tariffs.