Ontario delivered its 2020 budget and it did not really contain any surprises. While it is the largest nominal deficit in Ontario history, as a share of GDP the deficit for 2020-21 is about 4.6 percent which is one third that of the federal deficit to GDP ratio. Moreover, it is actually smaller than the one Ontario had in 2010-11 in the aftermath of the 2008-09 Great Recession when it was still at just over 5 percent.
Expenditures jumped in 2020-21 to $189.5 billion as a result of the pandemic – an increase of 15 percent over the previous year. It will remain high but not increase further for the next two years under the medium-term scenario going to $185.4 billion in 2021-22 and $188.3 billion in 2022-23 but all of these expenditure figures contain several billion dollars in contingency reserves.
Revenues fell 3 percent in 2020-21 as a result of the pandemic – not as big a hit as might be expected because federal transfer payments as a result of COVID jumped from $25.4 billion to $33.4 billion – an increase of 31 percent. However, those transfers will decline to $27.1 billion and 27.6 billion over the next two years. As a result, even with the projected economic recovery and its impact on tax revenue, total revenues are not expected to grow much until 2022-23 when they reach $160.2 billion.
The deficit is projected at $38.5 billion in 2020-21, $33.1 billion in 2021-22 and $26.2 billion in 2022-23 while the net debt will grow from $355 billion in 2019-20 to $473 billion by 2022-23. GDP is expected to grow by about 6 percent a year after this year so the net debt to GDP ratio is projected to only rise to just under 50 percent at 49.6 percent.
