Ontario: Fall Economic Statement 2023 - Plans for Balance Intact, but Delayed

Ontario’s 2023 Fall Economic Statement (FES) maintains plans to balance the books but now aims to do so in fiscal year 2025–26 (FY2026) rather than next year. With increased fiscal shortfalls forecasted this year and next, it anticipates that its net debt burden will peak at just above 39% of GDP next year and then decline.

Mirroring increased deficit projections, the province forecasts an increase in borrowing requirements relative to the March 2023 budget plan.

As expected, the federal reassessments of prior-year tax receipts that drove weaker-than-anticipated revenues in Ontario last year will carry forward. The impact on the bottom line will be partly offset by a reduction in outer-year fiscal plan contingencies.

The signature new policy measures were the removal of the provincial sales tax on new purpose-built rental construction, and extension of gas and fuel tax cuts. The costs aren’t likely to undermine the fiscal trajectory on their own. Prior spending and infrastructure targets were otherwise largely kept intact.

Amid heightened economic uncertainty, we like the province’s decision to keep its powder dry and keep its debt load on a sustainable trajectory. But a surging population will create new spending pressures later, and smaller buffers in the outer years of the plan could make the path to balance more challenging.