FOR IMMEDIATE RELEASE:
[La version française suit le texte anglais.]
COVID-19 PANDEMIC CAUSES RECORD DEFICIT AND DEBT IN ONTARIO
TORONTO, February 11, 2021 - Today, the Financial Accountability Office of Ontario (FAO) released its 2021 Winter Economic and Budget Outlook. This report provides an update on the economic and budget impact of the COVID-19 pandemic including the recent second wave of infections.
The historic negative shock to Ontario’s economy resulted in a record $35.5 billion budget deficit in 2020-21 due to a sharp drop in revenues coupled with a significant increase in program spending. As the provincial economy rebounds strongly from the pandemic, the budget deficit is expected to improve to $24 billion by 2022-23 but remain around $16 billion thereafter.
The significant increase in program spending in 2020-21 is mainly due to temporary COVID-19 expenditures. Excluding the COVID-19 funds, planned program spending growth in key sectors, such as health and education, will not keep pace with the demand for public services over the next two years. In addition to temporary COVID-19 expenditures, the 2020 Budget plan includes unusually large contingency funds in the coming years, for which no specific purpose was indicated.
The province’s debt burden increased significantly in 2020-21 and is projected to reach 49 per cent of GDP by 2022-23. Despite rapidly rising debt, historically low interest rates are expected to keep debt-interest expenses manageable, which are projected to reach $12.7 billion by 2022-23, just $254 million higher than in 2019-20.
To learn more, read the full report here.
- Ontario real GDP is projected to decline a record 5.9 per cent in 2020, followed by gains of 3.9 per cent in 2021 and 4.5 per cent in 2022.
- Ontario’s average annual unemployment rate jumped to 9.6 per cent in 2020, up from 5.6 per cent in the previous year.
- Tax revenues are projected to drop $10.3 billion in 2020-21. The decline in tax revenues will be partially offset by a significant $8.0 billion (31.3 per cent) increase in transfers from the federal government mainly related to COVID support.
- The 2020 Budget allocated $3.0 billion to its standard contingency funds in 2020-21, which is significantly above the usual size of the funds and expected to increase over the 2021-22 to 2022-23 period. The government has indicated that any unused contingency funds will be applied to reduce projected deficits.
About the FAO
Established by the Financial Accountability Officer Act, 2013, the Financial Accountability Office (FAO) provides independent analysis on the state of the Province’s finances, trends in the provincial economy and related matters important to the Legislative Assembly of Ontario. Visit our website at http://www.fao-on.org/en/ and follow us on Twitter at https://twitter.com/InfoFAO.