Ontario’s fiscal watchdog says the province’s economy will rebound over the next two years but the government is unlikely to reach its goal of a balanced budget by the start of the next decade.
The Financial Accountability Office (FAO) released a report on the province’s spring economic and budget outlook today, assessing the financial picture as the province starts to emerge from the pandemic.
If Covid-19 vaccine distribution goes ahead as planned and the pandemic subsides, the report projects real gross domestic product will rise by 5.8% this year and 4% next year.
But the FAO said economic growth could be slower if public health measures and vaccinations fail to contain a resurgence of the virus.
“The path to economic recovery in 2021 depends heavily on the success of the federal and provincial governments’ plans for the Covid-19 vaccine distribution,” the report said.
“There are challenges related to the rise of variant Covid-19 cases, noncompliance with public health guidelines and vaccine hesitancy.”
The report also found that under current policies, the Progressive Conservative government won’t balance its books by 2029-2030 as proposed in this year’s budget.
The FAO said the budget didn’t provide details on how the province would achieve the required $17.8 billion in permanent cost savings to reach that goal.
“To achieve its recovery plan, the government would have to introduce new program changes that lower spending by $1,281 per Ontarian by 2029–30 in 2020 dollars,” the report said.
Financial Accountability Officer Peter Weltman said his office chose to look at that lengthy timeline based the government’s own targets, and noted that a “lot can change” between now and 2030.
“As long as program spending exceeds revenues, the budget will never get back to balance, but we can’t obviously look that far out,” he said.
The report also flagged that future revenue forecast in the budget is lower than the government’s economic outlook, suggesting possible unannounced tax cuts in the future.
NDP Leader Andrea Horwath said it’s “alarming” that $17.8 billion in cuts would be required to get to the balanced budget goal. She said people will need services in the coming years to recover from the pandemic.
“This is a warning siren: more big cuts and bad choices are on the way,” she said.
“Everyday families will pay the price for (Premier Doug Ford)’s slash-and-burn agenda. You can’t cut $17.8-billion without hurting them deeply.”