By Ketki Saxena
Investing.com -- Ontario has slashed its fiscal deficit from projections a half-year ago, the provincial government said in its fall economic update, tabled in the legislature Monday by Finance Minister Bethlenfalvy.
Ontario’s budget shortfall is now expected to be $12.9 billion in the fiscal year ending March 31, 2023, compared to $19.9 billion projected in the April budget. The significantly smaller than expected fiscal deficit is due to an inflation-driven boost to individual and corporate tax revenue, and strong GDP growth.
Despite a smaller-than-expected deficit and tax windfall, the update takes Ontario back to its pattern of yearly deficits, after posting its first surplus in 14 years in fiscal 2021-2022.
Total revenue is expected at $186.8 billion, up from $179.8 billion previously expected. Total expenses meanwhile remain little changed at $198.8 billion.
The province is reducing its long-term borrowing program for current fiscal year by $9.3 billion to $32.2 billion, of which $13.6 billion has still to be raised. The annual borrowing rate is now expected to be 4.2%, up from 3.4% previously projected.
In terms of what’s next for the province’s economy, the government expects nominal GDP growth of 9.2% this year. GDP is expected to slow in 2023 and 2024, while jobs are also expected to slow. Salaries however are forecast to rise, catching up to inflation: wages are expected to grow 8.9% up from 5.6% previously. Home sales are expected to remain weaker until next year, and inflation is expected to stay high well into 2024.
In comments to media, senior officials said the revisions to GDP growth and jobs are an indicator of the "elevated degree of economic uncertainty", and foresee a likely recession next year.
The province doesn’t see significant changes to programs or financial expenses for the current fiscal year.