The 2021 Ontario budget is out, and the takeaway is clear: the government of Premier Doug Ford is staying the course.
The province is expected to stick to its November forecast of a $33.1 billion deficit for the upcoming fiscal year, with overall spending coming in at $173 billion, just a tad below the $187 billion the government said it would spend in 2020-21.
The deficit would then shrink to $27.7 billion in 2022-22 and $20.2 billion in 2023-24, the government’s base projections show.
While deficits of this size are “neither sustainable nor desirable” in the long term, they are “necessary” for the time being, as the province ramps up a massive vaccine rollout and seeks to jump-start its battered economy, Ontario Finance Minister Peter Bethlenfalvy said in the foreword to his very first budget.
The forecast of $33.1 billion in deficit spending for fiscal 2021-22 comes even as the government now expects Ontario’s economy to have shrunk by 5.7 per cent in 2020 – appreciably less than the 6.5 per cent contraction it predicted in its November 2020 budget.
The province’s planning projections, which are slightly lower than those the government collected from private sector economists, now show the economy growing by four per cent in 2021 and 4.3 per cent in 2022, before slowing down to 2.5 per cent and 2 per cent growth in 2023 and 2024.
If the economy evolves as those projections indicate, Ontario government coffers wouldn’t get out of the red until 2029-2030, budget documents show.
However, given the uncertainties surround the COVID-19 health emergency and its economic impacts, the budget also provides a “faster growth” and “slower growth” alternative scenarios, as it did in its 2020 edition. Under the more optimistic scenario, the province would be able to eliminate its deficit as soon as 2027-28. In the slower-growth scenario, it would take until 2031-32.
Ontario’s debt as a share of GDP is expected to climb to 48.8 per cent in the upcoming fiscal year, up from its current level of 47.1 per cent. By 2023-24 the size of the province’s debt load will be just over half of its GDP.
The government is banking on economic growth alone – without need for tax hikes or spending cuts – reducing the deficit to zero over the next several years. Tax revenues are expected to grow by more than $14 billion between the current fiscal year and 2023-24 but only as a result of growing employment, incomes and business activity.
While provincial employment has rebounded strongly after collapsing in March and April of 2020, it is still 4.1 per cent – or 305,300 jobs – below its pre-pandemic levels, according to government estimates.
The job-losses have been especially severe among young Ontarians aged 15 to 24 and part-time workers, with employment in the accommodation and food services industry still more than 25 per cent below what it was before the onset of the health emergency.