Ontario: 2022 Economic Outlook and Fiscal Review

Fiscal Forecasts Upgraded as Recession Looms

• Ontario’s Economic Outlook and Fiscal Review (EOFR) for fiscal year 2022–23 (FY2023) revised this year’s deficit $7B smaller than projected in Budget 2022 to $12.9B (1.2% of nominal GDP), and its net debt to GDP path is expected to come in about 3% lower than previously outlined through FY2025.
• Calendar year 2022 and 2023 economic growth forecasts were revised considerably lower, with notable downgrades in the housing market.
• Yet, as expected, own-source revenue forecasts were raised to a permanently higher trajectory following last year’s $11B windfall.
• Topline spending plans were largely unchanged from Budget 2022.
• New policy included a series of incremental tax and revenue measures designed to assist with the rising cost of living. At first blush, these appear reasonably targeted and unlikely to spur significant further price pressures.
• Long-term public borrowing is forecast to total $32.2B in FY2023, $38.4B in FY2024, and $32.3B in FY2025—respective reductions of $9.3B, $6.2B and $6.6B versus Budget 2022 projections.
• In the short- to medium-term, we expect Ontario’s bond market movements to be driven by global macroeconomic developments. But in the longer-run, adherence to plan and further improvements in the fiscal trajectory could result in lower market supply and tighter spreads against Government of Canada benchmarks.