Resource-rich Alberta will post its first deficit in 15 years as plummeting oil and gas prices plunge the province into recession and drain cash from its once-brimming coffers.
Proving that even the wealthy aren't immune from the deepening worldwide recession, Alberta will also shed about 15,000 jobs this year.
"Many Albertans will have a tough year ahead," said Finance Minister Iris Evans, as she delivered the bad news on Thursday.
"We've always said that we were not immune to the global recession. But we are better positioned than almost anybody else on the planet."
After several years of rapid economic development which were the envy of other provincial governments, Alberta's economy is expected to shrink by about 2 per cent this year.
Meanwhile, the province's massive $14-billion Heritage Fund -- set up 32 years ago by former premier Peter Lougheed -- has shrunk by about $3 billion because of the slumping stock market.
Equally troubling, unemployment in the province will jump from 3.6 per cent to nearly six per cent next year, marking a stunning reversal of fortunes for a province which has enjoyed incredible growth rates tied to oil and gas revenues.
Last summer, the province said it would post an $8.5-billion surplus. But those estimates were based on astronomical oil prices, which peaked at US$147 dollars a barrel.
As the price of crude dropped, the province was forced to revise the surplus to an estimated $2-billion total in November.
However, with oil now selling below US$40 per barrel, Alberta's balance sheet will be marked with red ink.
"Plunging energy prices, unsettled international financial markets, a drop in demand for our exports and other effects of the global recession have put Alberta in a much different position than we were in just six months ago," said Evans.
Premier Ed Stelmach said that the province has planned for the possibility of a deficit, which was outlawed by provincial legislation more than 10 years ago.
He added that the province's savings will allow it to ride out the difficult economic climate.
"This is very good planning," Stelmach said.
Those sentiments were echoed by economist Jacques Marcil, who said that Alberta still remains in a relatively good economic position.
"As bad as they sound the finances in Alberta are in very, very good shape compared to the rest of the country," said Marcil, an economist at the Canada West Foundation
Scott Hennig from the Canadian Taxpayers Federation said that Alberta will likely continue to have the lowest jobless rate in the country.
Hennig said that compared to areas like southern Ontario, pummeled by the vanishing domestic manufacturing sector, Alberta remains in an enviable position.
"Well, 15,000 lost jobs is pretty small in comparison to what southern Ontario is facing," said Hennig.
The government expects the economy to turn around by 2010 and Evans said that the province will continue to spend on infrastructure projects during the downturn.
"We have a huge budget bubble that is being fuelled by oil and gas," said Hennig. "We're going to go through this boom-bust cycle when it comes to our revenues if they don't fix this."
With a report by CTV's Janet Dirks and files from The Canadian Press
