The NDP government is not pinning its financial hopes on a hefty improvement in oil prices, says Alberta Finance Minister Joe Ceci.

With a budget burdened by an economic slump and the cost of fighting the Fort McMurray wildfire, the deficit is expected to soar to a record $10.9 billion, according to a quarterly financial update unveiled Tuesday. One of the few bright spots in the government's gloomy financial situation is a slight increase in the price of oil.

The province now expects a barrel of crude oil to average $45 (US) this year, rather than the $42 figure budgeted for in April's budget.

If the projection pans out, it will funnel $744 million in extra revenue into provincial coffers, compared to spring revenue projections.

Although oil markets are difficult to predict, Ceci says the province is playing it safe, while trying to wean Alberta off its fixation with oil revenues.

"We're not waiting for $80 oil. We've built our budget around the possibility of having $39 oil," Ceci said Wednesday in an interview with CBC Radio's Edmonton AM radio show.

"No, It's not a balanced budget, but it's a budget that we can see balancing," he added. "But we do need to hold the line on spending … and we do need to diversify our economy. We've been too narrowly focused on one commodity as the way to get out of this downturn, and it hasn't worked."

The economic downturn has drained Alberta's contingency account. The rainy-day fund will be dried up this year, and the province will rely on borrowing for funding shortfalls.

But Ceci remains optimistic about budget projections.

"We think it's a conservative approach and one that reflects where private sector forecasters are going," he said.

"I know it's a difficult time for many, many people in Alberta, but relative to many other places, even in Canada, we have an excellent quality of life, we have an excellent province with great infrastructure."

If budget price estimates for the benchmark West Texas Intermediate (WTI) crude oil are too low, Ceci and the government may be blamed for low-balling revenue projections.

But the Alberta government vastly underestimated the oil slump last year. And Alberta's financial picture has remained gloomy since.

Overall, the quarterly forecast calls for the economy to shrink by 2.7 per cent this fiscal year.

Added to the estimated 3.7 per cent contraction of the economy in 2015, it's the largest two-year consecutive decline in the economy since the early 1980s.