Ontario’s economy is on a “knife’s edge,” according to the province’s financial watchdog who warns global factors could force the Ford government to run another deficit.
Financial Accountability Officer (FAO) Peter Weltman said after a record-breaking year, the province’s economy is projected to slow down amid rising interest rates and cautious consumer spending — leading to a projected growth of 0.7 per cent, down from the government’s projection of 3.1 per cent.
While the FAO projects Ontario will have surpluses for the next six years, layering a potential recession on top of those figures could erase the province’s positive position.
“We’re on a knife’s edge right now,” Weltman told reporters at Queen’s Park. “We don’t think there will be (a recession) but we think we’re close.”
Weltman said if there’s another economic shock to the system such as spiking oil prices, a COVID-19 economic restriction or even global lockdowns disrupting supply chains, the province could suffer.
“That could be enough to tip us into recession,” Weltman said.
Despite the economic slowdown, the FAO is predicting that — under the Ford government’s current policies — the province is on course to record multiple budget surpluses.
In the 2021-22 year, the government reported a surprise year in the black to the tune of $2.1 billion, and the FAO projects surpluses will grow from $0.1 billion next year to $8.5 billion in 2027-28.
However, the report said tens of billions in government spending was unallocated, while programs were facing funding gaps.
“The spending plan in the 2022 Ontario Budget contains funding shortfalls across all program sectors, which total an estimated $40.0 billion over six years,” the report said.
The largest funding shortfall is in health, the FAO said, at $23.4 billion over six years. Education is pegged at a $6-billion shortfall and children’s and social services at just over $4 billion.
“We are in uncertain times,” Peter Bethlenfalvy, Minister of Finance, told reporters. “My job is to make sure that we put out a budget that’s transparent, which we have done.”
The shortfalls could be offset using money the government has not yet decided how it will spend. The FAO estimated the province has $44 billion in unallocated funds across the next six years.
Liberal finance critic Stephanie Bowman called the government’s accounting “disappointing,” but not surprising.
“In my opinion, they’re doing that because it gives them a picture that we don’t have the money to pay education and health-care workers the money they deserve,” Bowman said.
The Ontario NDP said it was “excessive from a contingency fund perspective.”
“This government is choosing not to invest in the health and well-being of the people of this province,” said Catherine Fife, Ontario NDP Finance Critic.
Growth in the province’s job market is also expected to “be weak” in 2023, the FAO said.
— with files from The Canadian Press