2013 Ontario Economic Outlook and Fiscal Review

Chapter II: Economic Outlook

Highlights

  • Government-projected real GDP growth — 1.3 per cent in 2013, strengthening to 2.1 per cent in 2014.
    • These projections for 2013 and 2014 are both down 0.2 percentage point from the 2013 Budget forecast.
  • Private-sector average projected real GDP growth — 1.4 per cent in 2013 and 2.2 per cent in 2014.
    • Since the 2013 Budget, the private-sector forecasts for Ontario real GDP growth are down 0.2 percentage point in both 2013 and 2014.
  • Net new jobs created since the recessionary low in June 2009 — 475,600.

Overview

Ontario’s economy continues to grow, albeit modestly. Global economic uncertainty has contributed to restrained export growth and business investment, holding back the overall pace of growth in the Ontario economy. As global growth improves, Ontario’s exports will strengthen, spurring business investment. Household spending, which accounts for close to 60 per cent of the economy, is also expected to grow modestly.

As part of building Ontario’s fiscal plan, the Ministry of Finance is assuming real gross domestic product (GDP) growth of 1.3 per cent in 2013, 2.1 per cent in 2014 and 2.5 per cent in both 2015 and 2016. 1 This compares to a forecast for real GDP growth at the time of the 2013 Budget of 1.5 per cent in 2013, 2.3 per cent in 2014 and 2.4 per cent in both 2015 and 2016.

TABLE 2.1 Ontario Economic Outlook
(Per Cent)
  2010 2011 2012 2013p 2014p 2015p 2016p
Real GDP Growth 3.3 1.8 1.5 1.3 2.1 2.5 2.5
Nominal GDP Growth 5.1 4.8 3.0 2.5 3.8 4.3 4.3
Employment Growth 1.7 1.8 0.8 1.5 1.4 1.6 1.5
CPI Inflation 2.5 3.1 1.4 1.1 1.8 2.0 2.0
p = Ontario Ministry of Finance planning projection.
Sources: Statistics Canada and Ontario Ministry of Finance.

While a forecast for sustained moderate growth is a reasonable basis for planning, there are considerable risks in the global economy. An emerging but fragile U.S. economic recovery could be derailed by persistent political discord, which has increased uncertainty and resulted in a 16-day partial government shutdown in October. There is a possibility of a further government shutdown if an agreement is not reached by January 15, 2014, and a renewed crisis over the debt ceiling, which will be reached again in February 2014.

In addition, the gradual withdrawal of exceptional monetary stimulus by the U.S. Federal Reserve could trigger increased financial market volatility. In Europe, there are early but modest signs of economic improvement, although significant fiscal challenges remain for a number of countries.

Recent Economic Developments

Ontario’s economy continues to create jobs. Over the first nine months of 2013, employment is up 105,600 (+1.6 per cent) compared to the same period last year. The majority of jobs gained so far this year were in full-time positions and in the private sector.

Ontario’s unemployment rate continues to trend lower, down 0.4 percentage point from the beginning of the year to 7.3 per cent in September 2013 and well below the recessionary high of 9.4 per cent in June 2009.

In the second quarter of 2013, Ontario’s real GDP advanced 0.6 per cent. Strong gains in international exports and solid household spending helped boost Ontario’s economy in the second quarter.

The view among private-sector economists, supported by recent economic data, suggests Ontario’s economy is well positioned for continued growth over the second half of 2013 and over the forecast period.

Ontario’s Economic Performance since the Recession

Ontario’s economy was hard hit by the global recession, with real GDP declining by 5.2 per cent from the second quarter of 2008 to the second quarter of 2009. Employment dropped by 266,000 net jobs, or 4.0 per cent, from September 2008 to the recessionary low in June 2009.

Government stimulus investment in infrastructure, business investment in plant and equipment, and strong growth in residential construction supported Ontario’s economic recovery. Major economic indicators, including real GDP and employment, are now well above pre-recession levels. Ontario’s real GDP has increased by 8.9 per cent since the recessionary low and, as of the second quarter of 2013, real GDP was 3.3 per cent above its pre-recession peak. But given the modest economic recovery, many households and businesses continue to feel vulnerable about the uncertain global economic environment and its impact on their future.

Chart 2.1 Ontario Real GDP since 2008–09 Recession

Since the recessionary low in June 2009, 475,600 net new jobs have been created. A strong recovery of 452,900 full-time jobs accounted for over 95 per cent of the employment gains since the end of the recession, while part-time employment increased by 22,800 net jobs. The majority of the net new jobs were in the private sector and in industries paying above-average wages. As of September 2013, Ontario had 209,800 more jobs than at the pre-recession peak in September 2008. Ontario’s unemployment rate has also declined from a recessionary high of 9.4 per cent in June 2009 to 7.3 per cent in September 2013.

Chart 2.2 Employment Gains Concentrated in Full-Time, Private-Sector, Above-Average Wage Jobs

The pace of job creation in Ontario since June 2009 has been stronger than in most developed economies, including the United States and the average for member countries in the Organisation for Economic Co-operation and Development (OECD). In addition, the pace of job creation in Ontario since June 2009 is ahead of all the Great Lakes States and the rest of Canada combined.

Chart 2.3 Ontario Job Recovery Ahead of U.S. and OECD Average

Global Economic Developments and Outlook

The global economy continues to grow at a modest rate. However, real GDP growth is expected to slow from 3.2 per cent in 2012 to 2.9 per cent this year. In the United States, tax increases and spending cuts have been a significant drag on overall growth while the European economy is only just emerging from a six-quarter-long recession. The pace of growth in the major emerging market economies has also weakened, in part due to increased financial volatility, a reflection of the anticipated reduction of exceptional monetary stimulus, or “tapering,” in the United States.

Global economic growth is projected to improve in 2014. Economic growth in the United States is expected to gradually strengthen. Europe is also expected to sustain a modest recovery, although weak demand, high unemployment rates and fiscal challenges continue to pose significant risks. China’s growth is expected to remain relatively robust, even as it transitions to a more consumption-based economy. Other emerging markets are expected to strengthen, as they benefit from stronger growth in global demand.

Chart 2.4 Global Economic Growth to Improve

U.S. Economy

The U.S. economy grew at an uneven pace in the first half of 2013 as it adjusted to higher taxes, spending cuts and volatile financial markets. However, the underlying momentum of the U.S. economy has proven resilient. Employment gains, averaging about 180,000 jobs per month so far this year, have supported stronger household consumption. Motor vehicle sales have rebounded and the housing market remains on an upward trend.

Long-term interest rates have increased since April, reflecting market expectations of a withdrawal of monetary stimulus by the U.S. Federal Reserve. The 10-year Treasury yield rose from a low of 1.7 per cent in April to a peak of 3.0 per cent in early September. Interest rates have partially retraced this increase, reflecting revised expectations that the Federal Reserve will postpone the start of “tapering.”

U.S. house prices are now about 16 per cent above their recent lows. Steady employment gains and higher housing and equity prices have helped repair consumer balance sheets. Household net worth has more than recovered from the impact of the recession, helping to support consumer spending and residential investment.

Chart 2.5 Strengthening U.S. Recovery

U.S. real GDP is expected to increase by 1.6 per cent this year and to average 2.8 per cent growth over the 2014–16 period. Employment is expected to improve modestly, with the unemployment rate declining from 7.5 per cent in 2013 to 6.1 per cent by 2016.

Although the markets for Ontario exports have become more diversified in recent years, the United States remains by far Ontario’s largest trading partner. It was the destination for about 78 per cent of the province’s international merchandise exports in 2012. Ontario exports of motor vehicles and parts to the United States totalled $54.5 billion and accounted for about 34 per cent of Ontario’s merchandise exports in 2012. U.S. motor vehicle sales are expected to reach 15.6 million units in 2013, up 8.0 per cent from 2012, and to increase to 16.4 million units by 2016, providing a buoyant market for Ontario exports.

Oil Prices

The price of West Texas Intermediate (WTI) crude oil has averaged $98 US per barrel so far this year, up from $94 US in 2012. North American oil production is expected to increase strongly in the near term, the result of technological innovations in the oil sector. However, despite these increases, strengthening global demand combined with high recovery costs will keep oil prices at relatively high levels over the forecast period. Oil prices are forecast to average $98 US per barrel in 2014, with private-sector forecasts ranging from $93 US to $108 US per barrel.

Chart 2.6 Oil Prices to Remain High

The Canadian Dollar

The Canadian dollar has edged down from close to parity in 2012 to an average of 98 cents US so far in 2013. The dollar is expected to remain just below parity over the medium term, although there is a wide divergence of views on the outlook for the currency. Private-sector forecasts for the Canada–U.S. dollar exchange rate in 2016 range from a high of 103 cents US to a low of 93 cents US.

Chart 2.7 Canadian Dollar to Remain Close to Parity

Financial Markets

Short-term interest rates have remained relatively low as central banks around the world maintain accommodative policies to support growth. Long-term interest rates have begun to rise as global financial markets anticipate the gradual reduction of exceptional monetary stimulus. The timing and pace of the adjustment are uncertain and, as a result, longer-term interest rates are likely to remain volatile. However, both short- and long-term interest rates are expected to rise over the medium term.

Private-sector economists expect the interest rate on three-month Canadian treasury bills to average 1.0 per cent this year, rise to 1.1 per cent in 2014 and reach 2.8 per cent by 2016. The yield on 10-year Government of Canada bonds is forecast to gradually rise from 2.3 per cent in 2013 to 3.8 per cent by 2016.

Chart 2.8 Interest Rates to Rise Gradually

Forecasts for key external factors are summarized in the table below. These are used as the basis for the Ministry of Finance’s forecast for Ontario’s economic growth.

TABLE 2.2 Outlook for External Factors
   2010 2011 2012 2013p 2014p 2015p 2016p
World Real GDP Growth (Per Cent) 5.2 3.9 3.2 2.9 3.6 4.0 4.1
U.S. Real GDP Growth (Per Cent) 2.5 1.8 2.8 1.6 2.6 2.9 2.8
West Texas Intermediate Crude Oil ($US/bbl.) 79 95 94 99 98 96 96
Canadian Dollar (Cents US) 97.1 101.1 100.1 97.4 96.5 97.0 97.0
Three-Month Treasury Bill Rate1 (Per Cent) 0.6 0.9 0.9 1.0 1.1 1.9 2.8
10-Year Government Bond Rate1 (Per Cent) 3.2 2.8 1.9 2.3 3.0 3.3 3.8
p = Ontario Ministry of Finance planning projection based on external sources.
1 Government of Canada interest rates.
Sources: IMF World Economic Outlook (October 2013), U.S. Bureau of Economic Analysis, Blue Chip Economic Indicators (October 2013), U.S. Energy Information Administration, Bank of Canada, Ontario Ministry of Finance Survey of Forecasts (October 2013) and Ontario Ministry of Finance.

Table 2.3 provides current estimates of the impact of changes in key external factors on the growth of Ontario’s real GDP, assuming other external factors remain unchanged. The relatively wide range for the impacts reflects uncertainty regarding how the economy would be expected to respond to these changes in external conditions.

TABLE 2.3 Impacts of Sustained Changes in Key External Factors on Ontario's Real GDP Growth
(Percentage Point Change)
  First Year Second Year
Canadian Dollar Depreciates by Five Cents US +0.1 to +0.8 +0.2 to +0.9
Crude Oil Prices Increase by $10 US per Barrel –0.1 to –0.3 –0.1 to –0.3
U.S. Real GDP Growth Increases by One Percentage Point +0.3 to +0.7 +0.4 to +0.8
Canadian Interest Rates Increase by One Percentage Point –0.1 to –0.5 –0.2 to –0.6
Source: Ontario Ministry of Finance.

Outlook for Ontario Economic Growth

The Ministry of Finance is forecasting continued growth in Ontario’s economy, with real GDP projected to grow by 1.3 per cent in 2013, 2.1 per cent in 2014 and 2.5 per cent in both 2015 and 2016. This compares to a forecast for real GDP growth at the time of the 2013 Budget of 1.5 per cent in 2013, 2.3 per cent in 2014 and 2.4 per cent in both 2015 and 2016.

Gains in exports and business investment will lead economic growth over the forecast period. Household spending will also grow moderately, in line with growth in household income.

Chart 2.9 Household Spending, Business Investment and Trade Will Support Economic Growth

Job creation is expected to strengthen over the medium term, with employment gains averaging 1.5 per cent a year over the forecast period. By 2016, Ontario will have created nearly a million net new jobs compared to 2003. Solid employment growth will allow the unemployment rate to decline steadily from an average of 7.5 per cent in 2013 to 6.6 per cent by 2016.

Chart 2.10 Employment Expected to Rise over the Medium Term

The Ontario Consumer Price Index (CPI) is expected to increase by 1.1 per cent in 2013, down from a 1.4 per cent increase in 2012. Consumer price inflation is forecast to be 1.8 per cent in 2014 and then rise to 2.0 per cent in 2015, the mid-point of the Bank of Canada’s target range for Canadian CPI inflation.

Real household spending growth is expected to remain steady this year at 1.5 per cent, in line with the increase in real income. Over the 2014–16 period, real household spending growth is expected to average 2.2 per cent per year.

Housing starts are expected to total 59,000 units in 2013, down from a recent peak of 77,000 units in 2012. Existing home sales are expected to be essentially unchanged in 2013, following a 2.1 per cent decline in 2012. Demand for new homes in Ontario will continue to be sustained by growth in the population. Housing starts are expected to average 62,500 units per year between 2013 and 2016.

The average Ontario resale home price is expected to increase 3.0 per cent in 2013. Going forward, a balanced resale market is expected to contribute to more stable average home prices. Although interest rates are expected to rise over the medium term, mortgage carrying costs are expected to remain affordable. However, rising debt levels may place some households in a vulnerable position as interest rates rise.

Chart 2.11 Housing in Ontario to Remain Affordable

Canada’s household debt-to-income ratio was 163.4 per cent in the second quarter of 2013. When adjusted to the U.S. methodology, it was 151.8 per cent, above the comparable U.S. ratio of 137.3 per cent. Although the rate of increase has moderated, the level of household debt in Canada remains elevated and will weigh on consumer demand in the coming years.

Chart 2.12 Canadian Household Debt Remains Elevated

Importantly, the rise in household debt has been matched by an even larger increase in household assets. Canada’s household net worth-to-income was at a record high in the first half of 2013, with net worth equivalent to more than six times the level of annual disposable income. Canadian household net worth-to-income continues to be above the comparable U.S. ratio.

Chart 2.13 Household Net Worth Improving

Business investment contributes to Ontario’s economic growth, jobs and prosperity. However, Ontario lags the United States and the rest of Canada when it comes to business investment as a share of GDP.

Since the recovery began, Ontario machinery and equipment (M&E) investment, a key determinant of labour productivity, has trailed investment growth in the United States. Although Ontario’s real M&E investment is improving, the gap with the United States has widened.

Chart 2.14 Household Net Worth Improving

In recent years, Ontario has seen a significant evolution in both the composition and the destination of its exports. Between 2007 and 2012, exports of services — including financial services and professional, scientific and computer services — rose by over 19 per cent. Exports to other provinces rose by about 13 per cent. Over the same period, merchandise exports to the United States declined by over 14 per cent while exports to countries other than the United States grew by 23 per cent.

This dramatic shift in Ontario’s exports is expected to continue. Ontario’s growing knowledge economy will contribute to a rise in services exports. Exports of services, which account for about 33 per cent of total exports, are projected to grow at a faster pace than goods exports. As well, exports to other provinces, which account for about 35 per cent of total Ontario exports, are expected to strengthen as economic growth in the rest of Canada accelerates. Ontario exporters are also developing new markets in fast-growing emerging economies, such as China, India and Indonesia. At the same time, the continuing recovery in U.S. consumption and business investment, including motor vehicle sales, will also support Ontario’s international exports. Real exports are projected to increase by an average of 3.2 per cent annually between 2013 and 2016, outpacing a 2.4 per cent increase in imports. This will lead to an improvement in Ontario’s net trade position and contribute to overall economic growth.

Chart 2.15 Exports Expected to Increase

Details of the Ontario Economic Outlook

The following table provides details of the Ministry of Finance’s economic outlook for 2013 to 2016.

TABLE 2.4 The Ontario Economy, 2011 to 2016
(Per Cent Change)
  Actual Projection
  2011 2012 2013 2014 2015 2016
Real Gross Domestic Product 1.8 1.5 1.3 2.1 2.5 2.5
Household Consumption 2.3 1.4 1.5 2.1 2.2 2.2
Residential Construction 3.9 6.7 0.2 (0.9) 1.0 2.4
Non-residential Construction 8.0 0.4 (0.6) 3.4 3.2 3.5
Machinery and Equipment 17.5 4.8 0.5 5.6 5.4 5.3
Exports 6.1 4.4 1.7 3.7 4.0 3.3
Imports 7.4 4.3 1.6 2.7 3.0 2.2
Nominal Gross Domestic Product 4.8 3.0 2.5 3.8 4.3 4.3
Other Economic Indicators            
Retail Sales 3.6 1.6 1.9 3.8 3.8 3.8
Housing Starts (000s) 67.8 76.7 59.0 58.0 65.0 68.0
Home Resales 2.6 (2.1) 0.5 2.0 2.0 2.0
Primary Household Income 4.2 3.2 2.9 3.6 4.4 4.7
Compensation of Employees 4.3 3.1 2.9 3.7 4.2 4.4
Net Operating Surplus — Corporations 14.1 (2.0) (3.6) 4.6 4.2 4.4
Consumer Price Index 3.1 1.4 1.1 1.8 2.0 2.0
Employment 1.8 0.8 1.5 1.4 1.6 1.5
Job Creation (000s) 121 52 104 97 114 110
Unemployment Rate (Per Cent) 7.8 7.8 7.5 7.3 7.0 6.6
Key External Variables            
U.S. Real Gross Domestic Product 1.8 2.8 1.6 2.6 2.9 2.8
WTI Crude Oil ($ US per Barrel) 95 94 99 98 96 96
Canadian Dollar (Cents US) 101.1 100.1 97.4 96.5 97.0 97.0
3-month Treasury Bill Rate1 0.9 0.9 1.0 1.1 1.9 2.8
10-year Government Bond Rate1 2.8 1.9 2.3 3 3.3 3.8
1 Government of Canada interest rates (per cent).
Sources: Statistics Canada, Canada Mortgage and Housing Corporation, Bank of Canada, U.S. Bureau of Economic Analysis, Blue Chip Economic Indicators (October 2013), U.S. Energy Information Administration and Ontario Ministry of Finance.

Private-Sector Forecasts

The Ministry of Finance consults with private-sector economists and tracks their forecasts to inform the government’s planning assumptions. Additionally, in the process of preparing the 2013 Ontario Economic Outlook and Fiscal Review, the Minister of Finance met with private-sector economists to discuss their views on the economy. All private-sector economists are projecting continued growth for Ontario over the forecast horizon. On average, private-sector economists are projecting growth of 1.4 per cent in 2013, 2.2 per cent in 2014 and 2.6 per cent in both 2015 and 2016. For prudent fiscal planning, the Ministry of Finance’s real GDP growth projections are slightly below the average private-sector forecast.

TABLE 2.5 Private-Sector Forecasts for Ontario Real GDP Growth
(Per Cent)
  2013 2014 2015 2016
BMO Capital Markets (October) 1.4 2.2
Central 1 Credit Union (October) 1.2 1.9 2.6 2.8
Centre for Spatial Economics (August) 1.3 1.4 2.4 2.4
CIBC World Markets (October/April) 1.4 2.3 2.3 2.1
Conference Board of Canada (July) 1.2 2.2 2.8 2.6
Desjardins Group (October/June) 1.4 2.3 2.8 2.5
IHS Global Insight (July) 1.5 2.4 2.7 2.7
Laurentian Bank Securities (September) 1.5 2.3 2.5
National Bank (October) 1.2 2.1
RBC Financial Group (September) 1.3 2.8
Scotiabank Group (October) 1.4 2.0
TD Bank Financial Group (October) 1.5 2.3 2.7
University of Toronto (August) 1.3 2.4 2.9 2.9
Private-Sector Survey Average 1.4 2.2 2.6 2.6
Ontario's Planning Assumption 1.3 2.1 2.5 2.5
Sources: Ontario Ministry of Finance Survey of Forecasts (October 2013) and Ontario Ministry of Finance.

Change in the Economic Outlook

The current private-sector average outlook for Ontario real GDP growth is 1.4 per cent in 2013, down from 1.6 per cent projected at the time of the 2013 Budget. The softer outlook reflects slower growth in the United States. Forecasts for 2014 have also been revised down somewhat compared to forecasts at the time of the 2013 Budget.

Chart 2.16 Weaker Private-Sector Outlook for Growth in 2013 and 2014

Comparison to the 2013 Budget

Compared to the 2013 Budget, key forecast changes include:

  • lower real GDP growth in 2013 and 2014, followed by stronger growth in 2015;
  • more moderate CPI inflation both this year and next;
  • stronger employment growth in 2013; and
  • lower nominal GDP growth in 2013 and 2014, reflecting both lower real GDP growth and slower economy-wide inflation.
TABLE 2.6 Changes in Ministry of Finance Key Economic Forecast Assumptions: 2013 Budget Compared to 2013 Fall Economic Statement (FES)
(Per Cent Increase)
  2013p 2014p 2015p
  2013 2013 2013 2013 2013 2013
Budget FES Budget FES Budget FES
Real Gross Domestic Product 1.5 1.3 2.3 2.1 2.4 2.5
Nominal Gross Domestic Product 3.0 2.5 4.1 3.8 4.2 4.3
Retail Sales 2.5 1.9 3.8 3.8 3.8 3.8
Housing Starts (000s) 61.0 59.0 60.0 58.0 65.0 65.0
Primary Household Income 2.8 2.9 3.9 3.6 4.2 4.4
Compensation of Employees 2.8 2.9 3.7 3.7 4.3 4.2
Net Operating Surplus — Corporations 3.3 (3.6) 5.0 4.6 4.0 4.2
Employment 1.2 1.5 1.4 1.4 1.5 1.6
Job Creation (000s) 83 104 98 97 107 114
Consumer Price Index 1.5 1.1 2.0 1.8 2.0 2.0
Key External Variables            
U.S. Real Gross Domestic Product 2.1 1.6 2.7 2.6 3.1 2.9
WTI Crude Oil ($ US per Barrel) 94 99 98 98 99 96
Canadian Dollar (Cents US) 98.0 97.4 99.5 96.5 100.0 97.0
3-month Treasury Bill Rate1
(Per Cent)
1.0 1.0 1.2 1.1 1.9 1.9
10-year Government Bond Rate1
(Per Cent)
2.0 2.3 2.6 3.0 3.2 3.3
p = Ontario Ministry of Finance planning projection.
1 Government of Canada interest rates.
Sources: Statistics Canada, Canada Mortgage and Housing Corporation, Bank of Canada, U.S. Energy Information Administration, U.S. Bureau of Economic Analysis, Blue Chip Economic Indicators (October 2013) and Ontario Ministry of Finance.

1 Based on information available to October 24, 2013.

Chart 2.1: Ontario Real GDP since 2008–09 Recession
Line chart shows the level of Ontario real GDP between the first quarter of 2008 and the second quarter of 2013. Ontario real GDP reached its pre-recession peak of $601.6 billion in the second quarter of 2008 and declined to its recessionary trough of $570.6 billion in the second quarter of 2009. As of the second quarter of 2013, real GDP has risen to $621.4 billion.

Return to Chart 2.1

Chart 2.2: Employment Gains Concentrated in Full-Time, Private-Sector, Above-Average Wage Jobs
Bar chart shows Ontario employment gains since June 2009. Total employment increased by 476,000 since June 2009. Full-time employment increased by 453,000, while part-time employment increased by 23,000. Private-sector employment increased by 342,000, while public-sector employment increased by 71,000 and self-employment rose by 63,000. Employment in above-average wage industries increased by 306,000, while employment in below-average industries increased by 169,000.

Return to Chart 2.2

Chart 2.3: Ontario Job Recovery Ahead of U.S. and OECD Average
Line chart compares the percentage change in employment relative to its
pre-recession peak in Ontario, the average for the member countries of the Organisation for Economic Co-operation and Development (OECD) and the United States between the first quarter of 2008 and the third quarter of 2013.
As of the third quarter of 2013, employment in Ontario has recovered to well above its pre-recession peak while the United States is below its pre-recession peak. As of the second quarter of 2013, the OECD is slightly higher than its pre-recession peak.

Return to Chart 2.3

Chart 2.4: Global Economic Growth to Improve
Bar chart shows real GDP growth for the global economy, advanced economies and emerging and developing economies from 2010 to 2014.
Real GDP growth for the global economy was 5.2 per cent in 2010, 3.9 per cent in 2011 and 3.2 per cent in 2012. According to the International Monetary Fund (IMF), growth is projected to be 2.9 per cent in 2013 and 3.6 per cent in 2014.
Real GDP growth for advanced economies was 3.0 per cent in 2010, 1.7 per cent in 2011 and 1.5 per cent in 2012. According to the IMF, growth is projected to be 1.2 per cent in 2013 and 2.0 per cent in 2014.
Real GDP growth for emerging and developing economies was 7.5 per cent in 2010, 6.2 per cent in 2011 and 4.9 per cent in 2012. According to the IMF, growth is projected to be 4.5 per cent in 2013 and 5.1 per cent in 2014.

Return to Chart 2.4

Chart 2.5: Strengthening U.S. Recovery
Bar chart shows U.S. real GDP growth from 2009 to 2016. U.S. real GDP declined 2.8 per cent in 2009 and grew by 2.5 per cent in 2010, 1.8 per cent in 2011 and 2.8 per cent in 2012. According to Blue Chip Economic Indicators, U.S. real GDP is projected to grow by 1.6 per cent in 2013, 2.6 per cent in 2014, 2.9 per cent in 2015 and 2.8 per cent in 2016.

Return to Chart 2.5

Chart 2.6: Oil Prices to Remain High
Line chart shows the price of WTI crude oil from 2000 to 2016. The price of West Texas Intermediate (WTI) crude oil rose from $30 US per barrel in 2000 to $94 US per barrel in 2012. Oil prices are expected to average $99 US per barrel in 2013. The Ontario Ministry of Finance projects oil prices will fall to $98 US per barrel in 2014 and then average $96 US per barrel in 2015 and 2016.

Return to Chart 2.6

Chart 2.7: Canadian Dollar to Remain Close to Parity
Line chart showing the Canadian exchange rate from 1990 to 2016 and the low and high private-sector projections for 2013 to 2016. The Canadian dollar fell from 87 cents US in 1991 to a low of 64 cents US in 2002. It trended up over the 2003 to 2012 period and was 100 cents US in 2012. The Ministry of Finance projects the Canadian dollar will remain just below parity through 2016, with private-sector projections ranging from a high of 103 cents US to a low of 93 cents US in 2016.

Return to Chart 2.7

Chart 2.8: Interest Rates to Rise Gradually
Line chart showing the 10-year Government of Canada bond yield and the three-month Government of Canada treasury bill rate from 1990 to 2016. The 10-year Government of Canada bond yield has declined from over 10 per cent in 1990 to a low of 1.9 per cent in 2012. It is expected to rise gradually to 3.8 per cent in 2016. The three-month treasury bill rate has declined from close to 13 per cent in 1990 to 0.9 per cent in 2012. It is expected to rise gradually to 2.8 per cent in 2016.

Return to Chart 2.8

Chart 2.9: Household Spending, Business Investment and
Trade Will Support Economic Growth
Bar chart shows the average annual real GDP growth and contributions to real GDP growth over the 2000 to 2007 period and forecasts over the 2013 to 2016 period.
Ontario’s annual real GDP growth averaged 2.3 per cent for the 2000 to 2007 period and is projected to average 2.1 per cent for the 2013 to 2016 period.
Household spending contributed 2.0 percentage points to growth over the 2000 to 2007 period, but is expected to contribute 1.2 percentage points over the 2013 to 2016 period.
Government contributed 0.8 percentage point to growth over the 2000 to 2007 period and is expected to subtract 0.1 percentage point from growth over the 2013 to 2016 period.
Residential investment contributed 0.2 percentage point to growth over the 2000 to 2007 period and is expected to make no contribution to growth over the 2013 to 2016 period.
Plant and equipment investment, which includes intellectual property and inventories, contributed 0.4 percentage point to growth over the 2000 to 2007 period and is expected to also contribute 0.4 percentage point to growth over the 2013 to 2016 period.
Net trade subtracted 1.1 percentage points from growth over the 2000 to 2007 period and is expected to contribute 0.4 percentage point from growth over the 2013 to 2016 period.

Return to Chart 2.9

Chart 2.10: Employment Expected to Rise Over the Medium Term
Bar chart shows the annual level of Ontario employment from 2009 to 2016. Ontario employment rose from 6.5 million in 2009 to 6.8 million in 2012. The Ontario Ministry of Finance projects employment will increase to 6.9 million in 2013, 7.0 million in 2014, 7.1 million in 2015 and 7.2 million in 2016.

Return to Chart 2.10

Chart 2.11: Housing in Ontario to Remain Affordable
Line chart shows the mortgage carrying cost as a share of disposable income per household in Ontario from 1981 to 2016. The line increased to a high of almost 37 per cent in 1990 and then declined to a low of 20 per cent in 1998. It has since trended higher, reaching 26 per cent in 2012. The Ontario Ministry of Finance projects the share to remain close to 27 per cent over the 2013 to 2016 period.

Return to Chart 2.11

Chart 2.12: Canadian Household Debt Remains Elevated
Line chart shows household debt as a percentage of household disposable income in Canada and the United States from the first quarter of 2000 to the second quarter of 2013.
The line for Canada increased steadily from 100 per cent in the first quarter of 2000 to 152 per cent in the second quarter of 2013. The line for the United States increased from 113 per cent in the first quarter of 2000 to 165 per cent in the fourth quarter of 2007. It has since declined to 137 per cent in the second quarter of 2013. Canada’s percentage was below the United States before the second quarter of 2011, but since then the Canadian percentage has remained above that of the United States.
Note: For comparability, the data for Canada include both households and
non-profit institutions serving households, and the definition of disposable income has been adjusted by including non-profit institutions serving households and other transfers and payments.

Return to Chart 2.12

Chart 2.13: Household Net Worth Improving
Line chart shows household net worth as a ratio to disposable income in Canada and the United States from the first quarter of 2000 to the second quarter of 2013. The line for Canada fell from 6.4 in the second quarter of 2007 to 5.5 in the first quarter of 2009, while the line for the United States fell from 6.6 in the first quarter of 2007 to 5.1 in the first quarter of 2009. Since then, the ratio of household net worth to disposable income has risen for both counties, with Canada at 6.4 and the United States at 6.0 in the second quarter of 2013.
Note: For comparability, the data for Canada include both households and
non-profit institutions serving households, and the definition of disposable income has been adjusted by including non-profit institutions serving households and other transfers and payments.

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Chart 2.14: Ontario Business Machinery and Equipment Investment Lags the United States
The line chart shows business machinery and equipment investment, which includes intellectual property, indexed to 2008=100 for Ontario and the United States from 2008 to 2014. The indexes for machinery and equipment fell in 2009 to 80.9 for Ontario and 85.7 for the United States. Since then, the indexes have both risen, reaching 100.6 for Ontario and 108.4 for the United States in 2012. According to Blue Chip Economic Indicators, the U.S. machinery and equipment investment will be 18.5 per cent above the 2008 level in 2014, while the Ontario Ministry of Finance projects Ontario’s machinery and equipment investment levels will be 6.3 per cent above 2008 levels in 2014.

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Chart 2.15: Exports Expected to Increase
The bar chart shows the annual level of Ontario exports in 2007 dollars from 2007 to 2016. Exports fell from $336 billion in 2007 to a low of $277 billion in 2009. Exports steadily increased to $334 billion in 2012. The Ontario Ministry of Finance projects exports will increase to $379 billion by 2016.

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Chart 2.16: Weaker Private-Sector Outlook for Growth in 2013 and 2014
The bar chart shows the average private-sector projection for Ontario’s real GDP growth at the time of the 2013 Budget and 2013 Ontario Economic Outlook and Fiscal Review (the current view).
The average private-sector forecast for Ontario real GDP growth for 2013 was 1.6 per cent in the 2013 Budget and 1.4 per cent currently.
The average private-sector forecast for Ontario real GDP growth for 2014 was 2.4 per cent in the 2013 Budget and 2.2 per cent currently.
The average private-sector forecast for Ontario real GDP growth for 2015 and 2016 was 2.5 per cent in the 2013 Budget and 2.6 per cent currently.

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