Economic and Budget Outlook Assessing Ontario’s Medium-term Budget Plan Fall 2019
Overview Government released the 2019 • Economic Outlook and Fiscal Review on November 6th. The FAO’s Economic and Budget • Outlook (EBO) provides an independent assessment of Ontario’s economic performance and budget outlook. Financial Accountability Office of Ontario | fao-on.org 2
Ontario’s economic growth has slowed Real GDP growth projected to average 1.7 per cent • annually over the outlook, reflecting weaker gains in household spending, investment, exports and government spending 5.0 Ontario Average Annual GDP Growth 4.3 4.0 3.6 3.0 (Per Cent) 2.0 2.4 1.0 1.7 0.0 2014-2018 2019-2023 Historical Projection Real Nominal Source: Statistics Canada and FAO. 3 Financial Accountability Office of Ontario | fao-on.org
Moderate revenue growth expected Revenue growth has been weak over the past two years – • averaging just 1.4 per cent annually Reflects policy changes by previous and current governments, • combined with more moderate economic growth Revenue growth improves to 3.7 per cent over next four years • 10.0 4.6 per cent average growth Total Revenue Growth (Per Cent) 8.0 3.7 per cent average growth 6.0 1.4 per cent average growth 4.0 2.0 0.0 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 Historical FAO Projection Source: Ontario Public Accounts, 2019 Ontario Economic Outlook and Fiscal Review and FAO. 4 Financial Accountability Office of Ontario | fao-on.org
Program spending restraint continues Fall Economic Statement increased program spending growth over next • two years, compared to 2019 budget outlook Spending growth in 2021-22 is unchanged from budget • Program spending expected to grow at average annual rate of 1.4 per • cent over full five-year outlook 2.5 Annual Program Spending Growth 2.1 2.0 1.4 1.5 (Per Cent) 1.3 1.2 1.2 1.2 1.1 1.0 0.5 0.1 0.0 2019-20 2020-21 2021-22 2022-23 2023-24 2019 Budget 2019 Fall Economic Statement Note: Estimates for program spending in 2022-23 and 2023-24 are based on program spending growth rates from the 2019 Ontario Budget. Source: 2019 Ontario Budget and 2019 Ontario Economic Outlook and Fiscal Review and FAO. 5 Financial Accountability Office of Ontario | fao-on.org
FAO baseline projection: budget balanced by 2021-22 Under FAO’s baseline projection, the budget is effectively balanced in 2021-22 • and improves to a large surplus by 2023-24 Government’s budget plan includes provisions for unannounced tax cuts and • spending measures Unannounced policies would delay balanced budget to 2023-24 and increase net debt by • $13.5 billion History Medium-term Outlook Recovery Plan 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 10 8.7 8 2019 FES* FAO baseline projection 6 Budget Balance ($ Billions) 3.7 4 2 0 -0.6 -2 -2.4 -4 -3.7 -4.4 -6 -5.5 -5.7 -8 Unannounced measures -7.4 -8.0 -8.5 incorporated beginning -10 2021-22 Source: Ontario Public Accounts, 2019 Ontario Economic Outlook and Fiscal Review and FAO. * Budget balance is presented before the reserve. 6 Financial Accountability Office of Ontario | fao-on.org
Government’s plan would reduce spending per person by $1,070 over five years 11,000 Program Spending Per Person (2018 dollars) 10,410 10,500 10,000 9,500 9,340 9,000 $1,070 Spending Decrease per Ontarian 8,500 8,000 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 Historical Medium -Term Outlook Recovery Plan Note: Estimates for program spending in 2022-23 and 2023-24 are based on program spending growth rates from the 2019 Ontario Budget. Source: Ontario Public Accounts, 2019 Ontario Budget, 2019 Ontario Economic Outlook and Fiscal Review and FAO. 7 Financial Accountability Office of Ontario | fao-on.org
Demand for public services likely to exceed planned spending FAO analysis suggests demand for public services by 2021-22 • could exceed government’s planned spending by $5 billion, after accounting for government’s cost cutting measures. Additional actions likely needed to achieve the government’s • spending plan 170 167.3 Unmet Total Program Expenses ($ Billions) 165 Demand 4.8 160 Program 6.6 Changes & Efficiency 155 155.9 Targets 150 148.8 145 2018-19 2019-20 2020-21 2021-22 Historical Medium-Term Outlook Source: FAO analysis of data from Treasury Board Secretariat. Numbers may not add due to rounding. 8 Financial Accountability Office of Ontario | fao-on.org
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