TORONTO – Ontario is projecting improving deficits over the next couple of years, despite an expected economic slowdown, and expects to nearly come to balance in two years.
The province’s fall economic outlook released Monday forecasts a deficit of $12.9 billion in this fiscal year, followed by $8.1 billion the following year and a deficit of just $700 million in 2024-25.
Government officials say a nearly $7-billion improvement in this year’s $19.9-billion deficit from the spring budget is largely due to higher nominal GDP and inflation.
Ministry of Finance officials say there is a high degree of economic uncertainty, and under a faster economic growth scenario Ontario could see a $9.2-billion surplus in 2024-25, while under a slower growth scenario, the deficit that year could be $8.5 billion.
Ontario’s real GDP growth is pegged for next year at just 0.5 per cent, down sharply from 2.6 per cent this year.
The projections come after Finance Minister Peter Bethlenfalvy had announced in September that the province ended the 2021-22 fiscal year with a $2.1-billion surplus, a far cry from the $33-billion deficit projected in the previous budget.
Bethlenfalvy said Monday that eliminating the deficit is a “critical part” of the government’s long-term vision for the province.
“After unprecedented spending in response to the pandemic, now is the time for governments to show restraint, to act cautiously and responsibly,” he said in the legislature.
“Irresponsible spending today will only make inflation more painful and drag out an economic downturn.”
In addition to a measure announced Sunday that a 5.7-cent gas tax cut that took effect in July would be extended until the end of 2023, the mini budget also contains changes to allow Ontario Disability Support Program recipients to keep more of their earnings and doubles payments to low-income seniors.
The government seeks to increase the monthly earnings exemption for people on ODSP from $200 to $1,000 per month. Above that amount, people on ODSP could keep 25 cents on the dollar. It could encourage up to 25,000 more people to participate in the workforce, the government said.
In the budget earlier this year, the government increased ODSP rates by five per cent, and promised to index future increases to inflation, but advocates have said the amounts still leave people unable to pay for basic needs.
For low-income seniors, the government proposes to double the Guaranteed Annual Income System payment for a year starting in January. The maximum payment for single seniors would be $166 per month and $332 per month for couples. The government is also indicating it is working on expanding eligibility for the payments.
The province also proposes to launch a voluntary clean energy credit registry for businesses.
“The proposed registry would provide businesses with more choice in how they pursue their environmental and sustainability goals,” the government said in the economic update document.
Companies that have commitments to use 100 per cent clean or renewable energy could use the credits to show their electricity has been sourced from clean resources such as hydroelectric, solar, wind, bioenergy and nuclear power, the government said. Revenue “could be” returned to ratepayers, help lower electricity costs or support more clean energy generation, the document said.
As well, the government is proposing tax changes that would allow about 5,500 more businesses to use the small business corporate income tax rate. It is currently subject to a limit of $500,000 of income that phases out between $10 million and $15 million of taxable capital and the government proposes to raise that phase out to between $10 million and $50 million.
The change would give businesses $185 million in income tax relief over three years, the government said.
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