EDMONTON, Alberta, Aug. 24 (UPI) -- The financial impact of May wildfires that curbed total Canadian oil production and the strains of lower oil prices are taking a toll, a provincial leader said.
The nation's economy is already under pressure from lower crude oil prices, which resulted in a 3.7 percent contraction for the oil-rich province of Alberta. The provincial government expected further economic woes because of wildfires that raged through parts of Alberta in May. Blazes that devastated parts of Fort McMurray idled about 1 million barrels per day worth of regional oil production.
More than 1,370 square miles were impacted by the wildfires. Evacuation orders were issued for at least 80,000 people in the area.
The provincial government of Alberta said it estimated a net fiscal impact of about $387 million from the wildfires. Considering this, Alberta's finance minister said the provincial economy is expected to run an $8.3 billion deficit, a figure that's about $400 million higher than previous estimates.
"In the face of the oil price collapse and the economic impact of the wildfires, our government continues to take a prudent approach, controlling spending, protecting critical public services, and taking action to create jobs and diversify our economy," Finance Minister Joe Ceci said in a statement.
The credit rating for the provincial government was lowered this year by Moody's Investors Service, which characterized the debt burden as "unconstrained."
Ceci said it may take until the next decade to balance the provincial budget, though recovery is expected to emerge with short-term growth in terms of gross domestic product of 2.4 percent. With oil prices rebounding from an early 2016 slump below $30 per barrel, Ceci said the economy was on pace to pull out of recession.
The federal Bank of Canada in July said it expected national GDP to contract 1 percent in the second quarter, but then grow by 3.5 percent as oil production builds in Alberta and reconstruction in Fort McMurray gains momentum.