TORONTO (Reuters) – Ontario, Canada’s most populous province, forecast on Wednesday its budget deficit would narrow in the upcoming fiscal year and return to balance in 2029-30 as the economy rebounds from the coronavirus crisis.
The deficit is seen narrowing to C$33.1 billion ($26.4 billion) in 2021-22, matching a November projection, but lower than the record C$38.5 billion deficit forecast for 2020-21, a budget document showed. The fiscal year begins on April 1.
The deficit is then seen shrinking further in future years before swinging to a modest surplus in 2029-30.
The economy is expected to grow by 4% in 2021 and 4.3% in 2022, with the pace then moderating in subsequent years. It contracted by an estimated 5.7% in 2020.
The 2021 growth forecast for the province, which is home to manufacturers and Canada’s major financial center, was less than 4.9% seen in November and slightly below the average of private-sector forecasts.
With economic activity recovering, revenue is forecast to rise 1.4% to C$154 billion in the upcoming fiscal year, while expenses are seen falling to C$173 billion, a drop of 2.7%, as funding of COVID-19 programs dials back.
Still, over a four-year period, including the current fiscal year, the province raised pandemic-related spending by C$6.1 billion to C$51 billion. It includes C$2.3 billion more for COVID-19 testing and contact tracing in 2021-22, as well as additional money for parents and small businesses.
A second payment of the Ontario Small Business Support Grant was announced, which will raise total support from the grant to C$3.4 billion.
The province, which is one of the world’s largest sub-sovereign borrowers, forecast net-debt-to-GDP rising to 48.8% in 2021-22 from 47.1% in 2020-21. It is seen peaking at 50.5% in 2024-25 before gradually declining to 46.4% in 2029-30.
($1 = 1.2553 Canadian dollars)
(Reporting by Fergal Smith; Editing by Chizu Nomiyama)
