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Ontario expects economic growth to drop off as province faces possible recession

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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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China’s Central Bank Cuts Key Short-Term Rate to Buoy Economy – Bloomberg

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China’s Central Bank Cuts Key Short-Term Rate to Buoy Economy  Bloomberg

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Here is Trump economy: Slower growth, higher prices and a bigger national debt

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If Donald Trump is re-elected president of the United States in November, Americans can expect higher inflation, slower economic growth and a larger national debt, according to economists.

Trump’s economic agenda for a second term in office includes raising tariffs on imports, cutting taxes and deporting millions of undocumented migrants.

“Inflation will be the main impact” of a second Trump presidency, Bernard Yaros, lead US economist at Oxford Economics, told Al Jazeera.

“That’s ultimately the biggest risk. If Trump is president, tariffs are going up for sure. The question is how high do they go and how widespread are they,” Yaros said.

Trump has proposed imposing a 10 percent across-the-board tariff on all imported goods and levies of 60 percent or higher on Chinese imports.

During Trump’s first term in office from 2017 to 2021, his administration introduced tariff increases that at their peak affected about 10 percent of imports, mostly goods from China, Moody’s Analytics said in a report released in June.

Those levies nonetheless inflicted “measurable economic damage”, particularly to the agriculture, manufacturing and transportation sectors, according to the report.

“A tariff increase covering nearly all goods imports, as Trump recently proposed, goes far beyond any previous action,” Moody’s Analytics said in its report.

Businesses typically pass higher tariffs on to their customers, raising prices for consumers. They could also affect businesses’ decisions about how and where to invest.

“There are three main tenets of Trump’s campaign, and they all point in the same inflationary direction,” Matt Colyar, assistant director at Moody’s Analytics, told Al Jazeera.

“We didn’t even think of including retaliatory tariffs in our modelling because who knows how widespread and what form the tit-for-tat model could involve,” Colyar added.

‘Recession becomes a serious threat’

When the US opened its borders after the COVID-19 pandemic, the inflow of immigrants helped to ease labour shortages in a range of industries such as construction, manufacturing, leisure and hospitality.

The recovery of the labour market in turn helped to bring down inflation from its mid-2022 peak of 9.1 percent.

Trump has not only proposed the mass deportation of 15 million to 20 million undocumented migrants but also restricting the inflow of visa-holding migrant workers too.

That, along with a wave of retiring Baby Boomers – an estimated 10,000 of whom are exiting the workforce every day – would put pressure on wages as it did during the pandemic, a trend that only recently started to ease.

“We can assume he will throw enough sand into the gears of the immigration process so you have meaningfully less immigration, which is inflationary,” Yaros said.

Since labour costs and inflation are two important measures that the US Federal Reserve weighs when setting its benchmark interest rate, the central bank could announce further rate hikes, or at least wait longer to cut rates.

That would make recession a “serious threat once again”, according to Moody’s.

Adding to those inflationary concerns are Trump’s proposals to extend his 2017 tax cuts and further lower the corporate tax rate from 21 percent to 20 percent.

While Trump’s proposed tariff hikes would offset some lost revenue, they would not make up the shortfall entirely.

According to Moody’s, the US government would generate $1.7 trillion in revenue from Trump’s tariffs while his tax cuts would cost $3.4 trillion.

Yaros said government spending is also likely to rise as Republicans seek bigger defence budgets and Democrats push for greater social expenditures, further stoking inflation.

If President Joe Biden is re-elected, economists expect no philosophical change in his approach to import taxes. They think he will continue to use targeted tariff increases, much like the recently announced 100 percent tariffs on Chinese electric vehicles and solar panels, to help US companies compete with government-supported Chinese firms.

With Trump’s tax cuts set to expire in 2025, a second Biden term would see some of those cuts extended, but not all, Colyar said. Primarily, the tax cuts to higher earners like those making more than $400,000 a year would expire.

Although Biden has said he would hike corporate taxes from 21 percent to 28 percent, given the divided Congress, it is unlikely he would be able to push that through.

The contrasting economic visions of the two presidential candidates have created unwelcome uncertainty for businesses, Colyar said.

“Firms and investors are having a hard time staying on top of [their plans] given the two different ways the US elections could go,” Colyar said.

“In my entire tenure, geopolitical risk has never been such an important consideration as it is today,” he added.

 

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China Stainless Steel Mogul Fights to Avoid a Second Collapse

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Chinese metal tycoon Dai Guofang’s first steel empire was brought down by a government campaign to rein in market exuberance, tax evasion accusations and a spell behind bars. Two decades on, he’s once again fighting for survival.

A one-time scrap-metal collector, he built and rebuilt a fortune as China boomed. Now with the economy cooling, Dai faces a debt crisis that threatens the future of one of the world’s top stainless steel producers, Jiangsu Delong Nickel Industry Co., along with plants held by his wife and son. Its demise would send ripples through the country’s vast manufacturing sector and the embattled global nickel market.

 

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