{"id":1593,"date":"2022-04-29T13:30:57","date_gmt":"2022-04-29T13:30:57","guid":{"rendered":"https:\/\/www.rbc.com\/en\/economics\/2022\/04\/29\/ontario-budget-2022-keeping-spending-in-motion-as-pandemic-impact-fades\/"},"modified":"2022-04-29T13:30:57","modified_gmt":"2022-04-29T13:30:57","slug":"ontario-budget-2022-keeping-spending-in-motion-as-pandemic-impact-fades","status":"publish","type":"post","link":"https:\/\/www.rbc.com\/en\/economics\/canadian-analysis\/provincial-and-fiscal-outlooks\/provincial-budgets-and-economic-statements\/ontario-budget-2022-keeping-spending-in-motion-as-pandemic-impact-fades\/","title":{"rendered":"Ontario budget 2022: Keeping spending in motion as pandemic impact fades"},"content":{"rendered":"
  • Ontario is projected a higher deficit of $19.9 billion in FY 2022-23, as spending ramps up<\/li>\n
  • Sustained economic growth to drive revenues higher to $180 billion<\/li>\n
  • Expenses to more than offset growth in revenues, reaching $199 billion<\/li>\n
  • Ontario\u2019s net debt-to-GDP to settle below 42% over the medium-term<\/li>\n
    \n

    On April 28th, Ontario Minister of Finance, Peter Bethlenfalvy, delivered his last provincial budget before Ontarians go to the polls on June 2nd. While previous pandemic budgets focused on pandemic recovery, Budget 2022 adopts a different tone, shifting to \u201crebuilding.\u201d Despite the fading impact of the pandemic, Ontario is ramping up spending in a big way. The province\u2019s deficit is expected to grow to $19.9 billion by FY 2022-23 from $13.5 billion in FY 2021-22, largely due to a myriad of new spending measures. <\/p>\n

    The government plans to boost expenditures by $11.5 billion this year, or nearly double the $6.2-billion forecasted rise in revenues. The majority of new measures are geared towards hospitals, highways, and housing, including record investments in infrastructure, and tax and fee reductions intended to lower the cost of living for Ontarians. In the base case scenario, Ontario will balance the budget by FY 2027-28, two years ahead of the previous timeline. Of course, in a faster growth scenario, the books could be balanced as soon as FY 2024-25.<\/p>\n

    Stronger-than-expected nominal economic growth last year will contain the weight of a rising provincial debt. Ontario\u2019s net debt-to-GDP ratio is expected to stay below 42% through the six-year fiscal plan, representing a significant improvement compared to what was expected in Budget 2021. <\/p>\n

    While it\u2019ll be ultimately up to Ontarians to pass judgment on June 2nd, we\u2019d caution that running a larger deficit, ramping up spending and cutting license plate fees at a time when the economy is bumping against capacity limits may just add fuel to the inflation fire. It also risks being a lost opportunity to repair the province\u2019s finances more quickly while the economic environment is favourable. Depending on the election outcome, though, this budget may potentially not be the final one for 2022. <\/p>\n

    Revenues trend higher with plenty of upside risk <\/h4>\n

    Ontario\u2019s revenues are expected to grow by $6.2 billion (+3.6%) in FY 2022-23 to $180 billion. The majority of this increase can be attributed to higher income tax revenues and sales tax receipts. Both own-source revenues and federal transfers are projected to grow this year. Federal transfers will in fact increase at an average annual rate of 4% over the entire fiscal horizon. Though one-time funding related to COVID-19 is set to decline in FY 2022-23, the federal government will transfer $7.7 billion to the province over the next three fiscal years, the majority of which will be allocated to the Canada-Ontario Early Years and Child Care Agreement. <\/p>\n