The Ontario government is expecting economic growth and job creation to slow considerably in 2023 and 2024 as the province navigates global headwinds like sticky inflation and high interest rates.
Short-term uncertainty was the key theme of Ontario’s 2022 fall economic statement, which was tabled in the legislature Monday by Finance Minister Peter Bethlenfalvy. The fiscal blueprint does project improving deficits — nearly coming to balance by 2025 — and includes a number of new tax measures targeted at small businesses and seniors, and changes to the Ontario Disability Support Program (ODSP).
It also features significant downward revisions to real GDP growth when compared to the 2022 budget passed in August.
The government is now forecasting real GDP growth at 0.5 per cent in 2023, 1.6 per cent in 2024 and 2.1 per cent in 2025. That’s down from previous projections of 3.1 per cent, 2 per cent and 1.9 per cent, respectively, in the budget.
A similar trend is expected for job growth. While the province netted about 324,000 jobs this fiscal year, that’s anticipated to fall to just 38,000 next year — down from 153,00 in August’s budget. The finance ministry is forecasting roughly 100,000 net jobs to be created in 2024 and about 117,000 in 2025.
At a technical briefing for media, senior officials said the revisions to GDP growth and jobs are an indicator of the “elevated degree of economic uncertainty” fuelled by rising interest rates as central banks try to tame inflation. They added that, taken collectively, private-sector forecasts suggest a recession is likely next year.
The fall economic outlook does include more bullish forecasts for the provincial deficit. The government is projecting a $12.9-billion deficit for 2022-2023, about $7.9 billion lower than previously stated in the budget. The reduction is due mainly to higher-than-expected tax revenue and GDP growth this year.
The deficit is then expected to fall to $8.1 billion in 2023-2024 and $700 million the following year.
Bethlenfalvy said Monday that eliminating the deficit is a “critical part” of the government’s long-term vision for the province.
“After unprecedented spending in response to the pandemic, now is the time for governments to show restraint, to act cautiously and responsibly,” he said in the legislature.
“Irresponsible spending today will only make inflation more painful and drag out an economic downturn.”
Public accounts released by the province in August showed a $2.1-billion surplus for the 2021-2022 fiscal year, but finance officials said Monday that those accounts do not account for “forward-looking” factors.
New tax, affordability measures
As part of the fall economic statement, the government is proposing to boost the monthly earnings exemption for Ontarians on disability support to $1,000, up from $200. That means ODSP recipients who have jobs will get to keep more of their support payments.
The Ministry of Finance estimates the measure would help about 25,000 people, and could potentially encourage another 25,000 ODSP recipients to join the workforce.
Ontarians on ODSP previously told CBC Toronto that the current exemption rate can be a disincentive to seek out work.
The fiscal outlook also allocates about $760 million to ensure that the core allowances for ODSP recipients are tied to inflation starting in July 2023 — a promise the government previously made but had not funded.
The government also committed to doubling the Guaranteed Annual Income System payment for low-income seniors for one year, beginning in January. That would increase the maximum payment for single seniors to $166 per month, and $332 per month for couples.
On the eve of the fall economic statement, Premier Doug Ford announced a 5.7-cent gas tax cut that took effect in July would be extended a year until the end of 2023.
Meanwhile, the province is also introducing tax relief for some businesses. The legislation tabled today would extend the phase-out range for the small business corporate tax rate from $10 million to $50 million of taxable capital. Currently, the range tops out at $15 million.
The province also proposed to launch a voluntary clean energy credit registry for businesses.
“The proposed registry would provide businesses with more choice in how they pursue their environmental and sustainability goals,” the government said in the economic update document.
Companies that have commitments to use 100 per cent clean or renewable energy could use the credits to show their electricity has been sourced from clean resources such as hydroelectric, solar, wind, bioenergy and nuclear power, the government said. Revenue “could be” returned to ratepayers, help lower electricity costs or support more clean energy generation, the document said.
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