A new report is putting into focus the devastating impact of the COVID-19 pandemic on Ontario's finances.
The Financial Accountability Office of Ontario has released its Spring 2020 Economic and Budget Outlook report, which says the pandemic-related shutdown of the economy and the increased government spending that has come with it will see the deficit quadruple to $41 billion in the 2020-2021 fiscal year. The figure would blow away the previous record deficit of $19.3 billion in 2009-2010.
The report also says Ontario's debt-to-GDP ratio will swell to a record 49.7 per cent in 2020-2021. That represents an increase of almost 10 percentage points from last year. While the FAO does expect economic recovery throughout 2021, the ratio will only fall to 48.7 per cent.
"Ontario’s economic recovery will depend on the success of the pandemic containment measures and the pace at which the economy can be safely reopened," the FAO said. "Assuming the pandemic shutdown is gradually eased through the summer, the FAO projects that Ontario’s economy will steadily strengthen into 2021, helping to reduce the budget deficit to $25.3 billion in 2021-22."
However, if ongoing health concerns or a second wave of the pandemic result in a longer than expected reopening of the economy, the FAO said we will see higher deficits and the debt-to-GDP ratio climb above 50 per cent.
The FAO report also says interest on Ontario's debt is expected to rise to $0.098 of every dollar of revenue in 2020-2021, up from $0.08 in 2019-2020. Revenues are expected to fall by 14 per cent in 2020-2021.
The full report can be read here.