The Honourable J. David Wake, Ontario’s Temporary Financial Accountability Officer, today released an updated Economic and Fiscal Outlook, providing an assessment of Ontario’s economic outlook and the Province’s fiscal position. The updated outlook incorporates developments since the FAO’s spring report, including the 2015-16 Public Accounts, new spending commitments from September’s Throne Speech and more moderate economic growth. The outlook also incorporates the impact of a change in the accounting treatment for jointly sponsored pension plans.
Based on these developments, the FAO is now projecting Ontario budget deficits of $5.2 billion in 2016-17 and $2.6 billion in 2017-18.
“Eliminating the budget deficit by 2017-18 will be more challenging given the assumed impact of the change in accounting treatment,” said FAO Chief Economist David West. Even so, “achieving budget balance in 2017-18 may still be within the government’s reach through the sale of public assets, the allocation of new revenues to existing spending or other steps.”
Beginning in 2018-19, the FAO expects the deficit to steadily deteriorate to $3.7 billion by 2020-21, as growth in revenue is outpaced by increases in program expense and interest on debt. West adds that “maintaining a balanced budget after 2017-18 will likely require additional measures to raise revenue or reduce expense.”
According to FAO projections, Ontario’s net debt is expected to rise by $64 billion over the next five years to $370 billion in 2020-21, the result of cumulative deficits, capital spending and the change in accounting treatment. This is about $20 billion higher than forecast in the FAO’s spring outlook, primarily due to the accounting change.
As a result of the higher debt, combined with slightly slower growth in nominal GDP, Ontario’s net debt-to-GDP ratio is now expected to plateau at about 41 per cent, significantly above the Government’s target of 27 per cent.