Finance Minister Nate Horner released prognostications for the second-quarter with a fiscal update Thursday, portraying a softening economy and laying it at the feet of tariffs imposed by U.S. President Donald Trump.
Published Nov 27, 2025
7 minute read
Finance Minister Nate Horner. Photo by David Bloom /Postmedia, file Article content
Oil prices are down, expenses are up, population’s still growing ahead of national rates — these are the downward pressures keeping the Alberta economy in check and the deficit up.
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Finance Minister Nate Horner released prognostications for the second-quarter with a fiscal update Thursday, portraying a softening economy and laying it at the feet of tariffs imposed by U.S. President Donald Trump.
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“It should come as no surprise to anyone that we are facing serious financial challenges this year. Last year, we had a surplus in cash available to allocate to the Heritage Savings Trust Fund to help grow it for future generations. However, with U.S. tariffs, we knew this year would be very different,” Horner said.
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The new energy agreement hammered out just in time between the province and Prime Minister Mark Carney is expected to be a hero in future budgets, increasing investment certainty, attracting opportunity and strengthening the Canadian economy.
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“It will mean a lot for the future this province,” Horner said. “It won’t help us this year or help us next year, a lot is going to depend on when there’s actually shovels in the ground. The great thing that we’ve seen from the Trans Mountain expansion is the narrowing of the differential, which has largely offset a lot of this drop in the price of West Texas Intermediate,” Horner said.
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“And that’s no part due to the pickup of Asian markets, seeking out heavy oil, so it will mean a lot for us down the road,” he said.
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Horner cited global trade tensions, lower oil prices, and ongoing economic uncertainty as weighing on the province’s finances in a “challenging financial year.” He promised the government would be taking a close look at spending on existing government programs.
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“I think we’re definitely going to look at them. You know, that’s been my commitment, that we’ll turn over every rock. We need to make sure that it continues to be a priority of the province. You know, there’s no way that I can have the capacity to balance this budget through cuts. I don’t think that’s what Alberta needs right now, but we need to ensure that we’re not outliers compared to the other provinces. And we need to ensure that the things we’re spending on are still the top priorities of today, and that will all manifest itself through some tough conversations, no doubt,” he said.
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With more jobs in the service, health care and education sectors in the second quarter, Alberta’s real GDP growth is expected to lead the country at 2.1 per cent and improve, but remain down significantly from last year’s three per cent, Horner said.
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Real manufacturing is expected to decline by three per cent in the coming year, he said.
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The projected second-quarter $6.4-billion deficit will be $1.2 billion more than estimated in Budget 2025. It is down $40 million from the first quarter, though.
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Alberta’s total revenue for 2025-26 is expected to come in at $73 billion, down $1.2 billion from Budget 2025.
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Personal income tax revenue is down $457 million from budget, thanks to lower-than-expected 2024 tax assessments.
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Corporate income tax revenue was the main revenue category champion — holding steady (up $236 million from budget) and forecast to soldier on at $7 billion in 2025-26, reflecting “the economic resilience in Alberta’s economy so far this year amid trade uncertainties,” the report said.
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Other tax revenue is up $23 million from budget, helped by gains in fuel tax from increased gas sales and offset by a decline in tobacco tax revenue.
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Federal transfers are up $222 million from budget, thanks to $73 million for the Canada health transfer and $23 million for the Canada social transfer.
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The province’s total expenses are forecast at $79.4 billion, up $52 million from budget, in every operating category across the board.
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Oil revenue flat
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The big dip is a 30 per cent decline in natural resource revenue from 2024-25. This puts estimated non-renewable resource revenue at $15.4 billion in 2025-26, down from a peak of $25.2 billion in 2022-23.
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The $1.7 billion drop in non-renewable resource revenue from the budget is attributed to lower bitumen royalties and broad-based reductions in conventional oil, natural gas and byproducts royalties.
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The West Texas Intermediate benchmark is down US$6.50 from the Alberta budget estimate of US$68 per barrel.
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The price of oil has decreased about US$28 per barrel since 2022-23, when the price of oil averaged more than US$89 per barrel.
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If oil prices rise to the projected US$61.50 per barrel West Texas Intermediate price and stay low throughout the fiscal year because of ongoing weakness in global markets, the government projects the widening deficit should also stay steady with first quarter numbers at around $6.4 billion, up from Budget 2025’s estimate of $5.2-billion deficit for 2025-26.
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The province is tracking shifts in sentiment towards the oil industry, and concerns for a supply glut in 2026.
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The geopolitical premium has been reduced in recent months with activity in the Middle East. OPEC has backpedaled plans to increase production in the first quarter of 2026.
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On the upside, Alberta oil production is going at a record clip, refinery margins have been “very strong,” and exports are performing better than expected, particularly with the Far East.
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Money for private health care
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Continued emphasis on the provincial government’s two-tier public/private system includes contingency funds of $81 million for partnerships between government and chartered surgical facilities, and the development of an “in-province surgical voucher” program.
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Some $40 million will fund new temporary beds and non-bed spaces for continuing care.
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A $43 million increase will fund new psychiatric beds, and an early implementation of “compassionate intervention.”
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Bright spots
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The 2025-26 Capital Plan is forecast at $8.8 billion, up $154 million from Budget 2025. This increase includes $106 million in capital investment and $48 million in capital grants.
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The number of building permits are up significantly in the institutional and government category, up more than 140 per cent year to date.
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Institutional government building is a strong sector, with hospital, supportive housing, and school construction up 74 per cent year-to-date.
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The province quietly passed the five million population mark, and is still growing at the fastest rate among provinces with 2.5 per cent population growth expected this year, expected to slow to lass than two per cent in 2026. The downside for those numbers is higher unemployment among young Albertans.
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In the trade column, manufacturing, particularly food, chemicals, wood products and agriculture, are grappling with roller-coaster tariffs and trade uncertainty, prompting businesses to put off hiring until a more stable economic moment.
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Although the private sector is expected to soften for the next few years, tariffs haven’t impacted Alberta as hard as some other provinces (presumably with differences in their manufacturing and export sectors), the report found.
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Expected second-quarter outcomes include “solid job growth” (and the provincial unemployment rate to recover down half a per cent from its current expected 7.4 per cent jobless rate) and inflation remaining “under control.”
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Contingency
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The government increased the contingency margin to $4 billion in budget 2025 in part to cover spending increases as collective bargaining agreements are settled as of the second quarter, Horner said.
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“We’ve allocated roughly $1.7 billion of the contingency,” he said.
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As of Q2, the government is allocating $711 million for emergency and disaster assistance, including wildfire response, emergency evacuation payments and tree replanting
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The adjusted operating budget includes $881 million from contingency for a bevy of new labour agreements reached in the first and second quarters with several large public sector unions, including those representing Alberta’s registered nurses and civil servants. Set aside is $240 million for ATA collective bargaining agreement, $470 million for various health unions, and $234 million across departments for the recent AUPE settlement.
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Those contingencies were offset in part by some savings, including a $78 million decrease in AIMCo investment management services, a $36 million decrease in technology innovation and emissions reduction due to updated modelling and economic data, and a $9 million reduction in the first quarter resulting from freezing the TIER Fund price at $95 per tonne of emissions.
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There was also a $19 million decrease due to lower costs for selling oil, driven by a decrease in purchase volumes and the price of West Texas Intermediate, in addition to a $64 million reduction in the first quarter forecast.
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The 2025-26 Heritage Savings Trust Fund second-quarter report notes that its value is forecast at $31.5 billion as of Sept. 30. The fund earned $770 million in net investment income over the second quarter, according to the report.
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