off-the-wire

Canada's Ontario province sees earlier return to budget surplus, economy stalling

Kitco Media
By Reuters
Published:
Updated:
Reuters
By Fergal Smith TORONTO, March 23 (Reuters) - Ontario, Canada's most populous province, on Thursday forecast a narrower budget deficit in the upcoming fiscal year and then a move into surplus in 2024-25, as it braced for an economic slowdown, expecting almost no growth in 2023. The province, like major peers such as Quebec and British Columbia, has benefited from a tax revenue windfall as its economy surged in 2022. But growth is expected to slow to 0.2% in 2023 from an estimated 3.7% last year, held back by higher borrowing costs after the Bank of Canada raised interest rates at a record pace to tackle inflation and global economic uncertainty.


"Ontario's economy remains resilient, but the road ahead continues to be uncertain," Finance Minister Peter Bethlenfalvy said in a statement. "Our government has the right plan to navigate these challenges. We are building Ontario so we can have a strong economy for the future and the infrastructure needed to support growth across the province." The budget includes planned investments of C$184.4 billion
($134.8 billion) over the next 10 years to build highways, transit and other infrastructure. Like the rest of Canada, Ontario's population is growing rapidly due to high immigration. The province is one of the world's largest sub-sovereign borrowers, while its major industries include financial services and motor vehicle manufacturing. A new investment tax credit for manufacturers was among the budget highlights as well as additional money for the province's critical minerals strategy. The Ring of Fire region in the province has one of the most promising mineral deposits in Canada. A deficit of C$1.3 billion was forecast for fiscal 2023-24, which begins on April 1, followed by a modest surplus of C$0.2 billion in 2024-25.


The move into surplus would be three years earlier than was forecast in last year's budget. A further surplus of C$4.4 billion is forecast in 2025-26. The three-year forecasting horizon includes reserves adding up to C$7 billion. For the current fiscal year, the province estimated a deficit of C$2.2 billion, which is C$4.4 billion lower than was expected in a fiscal update in February.


The net debt-to-GDP ratio is projected to be 37.8% in the current fiscal year and in 2023-24, which is the lowest level since 2011-12. In 2020-21, it spiked to 43.1% as the province borrowed heavily to support the economy after the start of the COVID-19 pandemic. Long-term borrowing by the province, which is the largest Canadian dollar issuer of green bonds, is expected to fall to a seven-year low of C$27.5 billion in 2023-24 from C$32.1 billion in 2022-23. ($1 = 1.3675 Canadian dollars) (Reporting by Fergal Smith; editing by Jonathan Oatis)

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