Category : Commentary

Ontario’s Provincial Debt

The Financial Accountability Office of Ontario (FAO) expects the Province’s net debt to rise by over $50 billion by 2020-21 to $350 billion. Understanding the nature of the risks of debt to the Province’s fiscal plan can help Members of Provincial Parliament in assessing any debt management and/or reduction strategy.

The Province’s debt burden is one of the highest among provincial governments in Canada. Ontario’s net debt increased significantly during the 2008-09 recession, and grew by $139 billion between 2007-08 and 2015-16. Ontario’s liabilities include non-market and market debt, which consists mainly of publicly held bonds, treasury bills, and US commercial paper issued in Canadian dollars and foreign currencies. Given the characteristics of Ontario’s debt (composition, interest rates, when it is due to be repaid and currency in which it is issued), interest rate risk is the most important risk associated with the Province’s debt. There is uncertainty surrounding the future level of interest rates due to market fluctuations and Ontario’s credit risk. All else equal, an increase in interest rates would lead to higher interest payments, which would reduce the Province’s fiscal flexibility.

Comparing Ontario’s Fiscal Performance with Other Provinces

The fiscal position of the provincial and local governments in Ontario has deteriorated compared to other provinces since the global recession in 2008-2009.

Ontario Business Investment Expected to Edge Lower in 2016

Statistics Canada’s recent survey of investment intentions revealed that total investment by Ontario businesses and public sector institutions is expected to edge down by 0.1% to $69.5 billion in 2016. This follows two strong consecutive increases of 11.5% and 9.6% in 2014 and 2015.

Assessing Budget 2016’s Fiscal Plan

Ontario’s 2016 Budget reaffirmed the government’s commitment to eliminate the budget deficit by 2017-18, and to maintain a balanced budget going forward. The Province’s plan continues to rely on relatively optimistic assumptions for revenue growth combined with aggressive plans to limit the growth in program spending. Maintaining balanced budgets beyond 2017-18 will likely prove challenging as new spending pressures emerge and revenue growth remains moderate.

Ontario Export Performance Disappoints in 2015

On February 5, Statistics Canada released international merchandise trade data for December 2015, which included annual Ontario exports and imports by trade category and country. According to Statistics Canada’s report, Ontario finished 2015 with a seemingly strong 10.5% increase in the value of its international exports, which followed an equally strong 8.0% gain in 2014. 

Ontario on Track for Stronger than Projected Economic Growth in 2015

On January 15, the Ministry of Finance released its quarterly Ontario Economic Accounts (OEA) report, showing that the province’s economy posted relatively strong economic growth in the third (July to September) quarter of 2015. Ontario real GDP increased 3.5% (annualized) in Q3, the strongest gain in a year.  

Ontario’s 2015 Labour Market Performance

On January 8, Statistics Canada (StatCan) released the Labour Force Survey (LFS) for December 2015, providing the first complete annual estimate of the economy’s performance in 2015. The release showed that while Ontario posted a solid job gain in December (+35,000 jobs on a month-to-month basis), on an annual basis, Ontario’s labour market continued to grow modestly in 2015.