Ontario is delivering on its commitment to balance the budget in a fair and responsible way — a plan that was first introduced in the 2010 Budget.
Strategic investments have helped to stimulate the Ontario economy, which has continued to grow despite an uncertain global environment. Over the past three years, Ontario’s economy has grown faster than Canada’s and that of all other G7 countries. Exports are up, businesses are hiring more workers, and household incomes are rising. In fact, Ontario’s real gross domestic product (GDP) is now 21.3 per cent above its recessionary low. Ontario’s unemployment rate has also steadily declined since the recession, reaching 5.9 per cent in October 2017, and has been below the national average for 31 consecutive months.
The strengthening economy has led to revenue growth, critical to maintaining a balanced budget. At the same time, the government has managed growth in program spending, allowing Ontario to remain the province with the lowest program spending per capita. The government has also improved the efficiency and effectiveness of public services, resulting in the program expense‑to-GDP ratio returning to its pre-recession level.
A growing economy, together with a balanced budget, is creating more opportunities for individuals and businesses in Ontario to share in the benefits resulting from the province’s return to economic strength.
Ontario’s Balanced Budget
The government is continuing to project a balanced budget in 2017–18 and ongoing balance in 2018–19 and 2019–20, unchanged from the 2017 Budget forecast.
The Public Accounts of Ontario 2016–2017 reported that the 2016–17 deficit was $1.0 billion. This result is $3.3 billion lower than projected in the 2016 Budget and marks the eighth year in a row that Ontario has beaten its deficit target.
Restoring balance adds stability to Ontario’s finances and positions the government to better respond to demographic challenges and unexpected global economic shocks the province may face in the coming years.
Historically low interest rates combined with cost-effective debt management have also helped the government overachieve on its fiscal targets year after year and supported its efforts to balance the budget. Furthermore, the government’s efforts to grow the economy, transform public services and manage spending responsibly have positioned the Province to build on the investments it is making to support health care, fairness for seniors, public education and modern infrastructure, and help small businesses succeed and grow.
Declining Net Debt-to-GDP
In 2008–09, when the negative impact of the global recession rippled across the world, the government refused to put vital public services at risk. Instead, it chose to lessen the impact of the recession on Ontario families through short-term stimulus investments that preserved and created jobs, while helping to restore economic growth. Ontario, like other jurisdictions in Canada and across the world, ran deficits. This resulted in an increase to the Province’s net debt-to-GDP ratio.
Since peaking in 2014–15 at 39.3 per cent, the net debt-to-GDP ratio has been on a declining track as a result of Ontario’s economic growth and the government’s progress towards a balanced budget in 2017–18. The net debt-to-GDP ratio is projected to be 37.3 per cent in 2017–18, lower than the 37.5 per cent forecast in the 2017 Budget.
A declining net debt-to-GDP ratio, together with low interest on debt costs as a percentage of revenues, positions the province for long-term sustainability and allows for a greater proportion of government spending to be invested in programs and services, thereby benefiting the people of Ontario.
About 62 per cent of the increase in net debt from 2008–09 to 2016–17 was due to the deficit. The remaining net debt increase was a result of investments in capital assets. Balanced budgets from 2017–18 onwards will ensure that increases in net debt will be limited to net investments in capital assets such as roads, bridges, hospitals and schools.
The government’s investments in capital assets will work to increase economic growth and help support GDP growing more quickly than debt, thereby helping the government achieve its net debt-to-GDP targets.
Ontario’s Economic Performance and Outlook
Ontario’s economy continues to grow and create jobs at a solid pace. Since 2014, Ontario’s real GDP growth has strengthened, positioning Ontario as a growth leader, not only in Canada, but among G7 countries. In fact, over the 2014–17 period, Ontario’s real GDP growth is on pace to exceed that of all G7 countries.
The economy continues to create high-quality jobs. Since the global recession, 800,000 net new jobs have been created in Ontario. The majority of these jobs have been full-time positions in the private sector and in industries that pay above-average wages. The unemployment rate has steadily declined, reaching 5.9 per cent in October 2017, and has been below the national average for 31 consecutive months.
Ontario’s economy is expected to continue to grow over the next two years. The Ministry of Finance is forecasting growth in Ontario’s real GDP of 2.8 per cent in 2017, which is higher than the 2017 Budget assumption of 2.3 per cent. For the 2017–20 period, real GDP growth is now expected to average 2.2 per cent compared to 2.0 per cent expected at the time of the 2017 Budget.
With the province’s economic growth projected to continue and balanced budgets planned over the outlook, Ontario is once again in a position of fiscal and economic strength that is essential for building a fairer and more inclusive province.
Chart 3.1: Ontario’s Return to Balance
This bar chart shows Ontario’s actual deficits versus deficit targets from 2009–10 through 2016–17, and the fiscal outlook for 2017–18 to 2019–20.
In the 2009 Ontario Economic Outlook and Fiscal Review, Ontario projected a $24.7 billion deficit for 2009–10. The actual result for 2009–10 was a deficit of $19.3 billion.
The 2010 Budget projected deficits of $19.7 billion for 2010–11, $17.3 billion for 2011–12, $15.9 billion for 2012–13, and $13.3 billion for 2013–14. The actual deficits were $14.0 billion in 2010–11, $13.0 billion in 2011–12, $9.2 billion in 2012–13, and $10.5 billion in 2013–14.
In the 2014 Budget, Ontario projected a $12.5 billion deficit for 2014–15. The actual result for 2014–15 was a deficit of $10.3 billion.
In the 2015 Budget, Ontario projected an $8.5 billion deficit for 2015–16. The actual result for 2015–16 was a deficit of $3.5 billion.
In the 2016 Budget, Ontario projected a $4.3 billion deficit for 2016–17. The actual result for 2016–17 was a deficit of $1.0 billion.
The government is projecting balanced budgets in 2017–18 through to 2019–20.
Chart 3.2: Net Debt-to-GDP
This line chart shows Ontario’s net debt-to-GDP from 1990–91 to 2019–20.
The net debt-to-GDP ratio peaked at 39.3 per cent in 2014–15 and has since been on a declining track. It is projected to be 37.3 per cent in 2017–18, 37.1 per cent in 2018–19, and 37.0 per cent in 2019–20.
Chart 3.3: Factors for Growth in Net Debt
About 62 per cent of the increase in net debt from 2008–09 to 2016–17 was due to the deficit, with investments in capital assets responsible for the balance. Balanced budgets from 2017–18 onwards will limit the increase in net debt to the difference between investments in capital assets and amortization which, as a non-cash expense, does not represent cash outflows.
Chart 3.4: Ontario’s Growth Strengthened in Recent Years
This bar chart shows that Ontario’s real GDP growth averaged 2.0 per cent per year during the 2003–07 period, −1.6 per cent during 2008–09, 2.0 per cent during 2010–13, and 2.7 per cent during 2014–17. Calculation for 2017 uses Ontario Ministry of Finance’s planning projection.
Chart 3.5: Ontario’s Unemployment Rate Remains below the National Average for 31 Consecutive Months
This line chart shows the monthly unemployment rates for Ontario and Canada for the period between January 2000 and October 2017. The unemployment rate in Canada has declined from a peak of 8.7 per cent in June 2009 to 6.3 per cent in October 2017. Ontario’s unemployment rate has declined from a high of 9.6 per cent in June 2009 to 5.9 per cent in October 2017, and has remained below the national average for 31 consecutive months.