Ontario’s Economic and Fiscal Outlook in Brief

Ontario’s Economic and Fiscal Outlook in Brief

Amid an elevated degree of economic uncertainty due to global geopolitical conflict, historically high inflation, rising interest rates and ongoing supply chain challenges, Ontario’s economy has proven resilient. This has allowed the government to reduce its deficits and borrowing requirements to finance Ontario’s Plan to Build, even in the face of economic uncertainty.

For 2022–23, the government is projecting a deficit of $12.9 billion, nearly $7 billion lower than the outlook published in the 2022 Budget. The government is ready to respond to uncertainty and risk and is prepared to support people and businesses while maintaining a responsible plan to eliminate Ontario’s structural deficit.

Over the medium term, the government is forecasting deficits of $8.1 billion in 2023–24 and $0.7 billion in 2024–25, an improvement of $4.3 billion and $6.9 billion, respectively, relative to the outlook presented in the 2022 Budget. Over the three-year outlook period between 2022–23 and 2024–25, the government is projecting a cumulative $18.1 billion improvement in the deficit outlook and a cumulative $26.1 billion reduction in borrowing needs since the 2022 Budget.

The government is committed to managing public finances in a responsible, transparent and accountable manner, especially in the face of economic uncertainty.

Ontario’s 2022–23 net debt-to-gross domestic product (GDP) ratio is now forecast to be 38.4 per cent, 3.0 percentage points lower than the 41.4 per cent projected in the 2022 Budget, and 0.8 percentage points lower than in 2021–22.

As with any forecast, there are numerous risks that are taken into consideration when determining Ontario’s fiscal framework. The 2022 Ontario Economic Outlook and Fiscal Review is being released when global economic conditions remain uncertain, driven by a variety of factors beyond the government’s control. As a result, the Ontario Ministry of Finance has developed Faster Growth and Slower Growth scenarios that the economy could take over the next several years to provide more transparency about how alternative economic scenarios could impact Ontario’s finances.

Ontario’s Economic Outlook — A Plan to Build in Uncertain Times

Ontario’s real GDP is projected to rise 2.6 per cent in 2022, 0.5 per cent in 2023, 1.6 per cent in 2024 and 2.1 per cent in 2025. For the purposes of prudent fiscal planning, these projections are set slightly below the average of private‐sector forecasts.

Revisions to Outlook Since the 2022 Budget

The outlook over the 2022 to 2025 period has been revised compared to the projections in the 2022 Budget. Key changes since the 2022 Budget include:

• Faster growth in nominal GDP in 2022 and slower growth in 2023 and 2024;
• Slower growth in real GDP from 2022 to 2024;
• Higher job creation in 2022, but lower job growth in 2023 and 2024;

• Higher Consumer Price Index (CPI) inflation from 2022 to 2024; and
• Weaker housing resales in 2022 and 2023.

A Strong Foundation for the Next Generation

The government is providing the people of Ontario with a transparent look into the province’s finances and how it intends to enhance its plan to build Ontario while redoubling its efforts to bring Ontario’s finances back to balance.

The government’s plan is consistent with the Fiscal Sustainability, Transparency and Accountability Act, 2019 and its governing principles that guide Ontario’s fiscal policy.

• Transparent: The government continues to demonstrate its commitment to transparency through the release of regular fiscal updates. For the fifth year in a row, the Auditor General of Ontario has provided a clean audit opinion on the government’s consolidated financial statements.
• Responsible: The government has developed a measured and responsible approach to managing Ontario’s finances that is driven by economic growth, while investing in key public services and capital projects that will help improve economic productivity and create jobs.
• Flexible: The government’s plan has built in appropriate levels of prudence in the form of contingency funds and a reserve to ensure it has the necessary fiscal flexibility to respond to changing circumstances.
• Equitable: The government’s plan strengthens critical public services, such as highways, transit, hospitals and key infrastructure, for the people of today and ensures they are maintained for the benefit of future generations.
• Sustainable: The government is committed to employing a flexible approach to respond to the ongoing economic uncertainty while balancing these needs with the long-term sustainability of Ontario’s finances, including the government’s debt burden.

While the Public Accounts of Ontario 2021–2022 reported a $2.1 billion surplus for Ontario, this surplus is not indicative of deficit projections going forward, as the Public Accounts do not consider forward-looking factors such as the impact of changes in the economic outlook or planned future spending decisions. The government is committed to eliminating the province’s structural deficit and is redoubling its efforts to bring Ontario’s finances back to balance. In light of ongoing economic uncertainty, the government will preserve the flexibility necessary to respond to unforeseen events and global economic risks while implementing its long-term plan to invest in the future of Ontario.

Ontario’s Fiscal Plan

In 2022–23, the government is projecting a deficit of $12.9 billion, $6.9 billion lower than the deficit forecast at the time of the 2022 Budget. Over the medium term, the government is forecasting deficits of $8.1 billion in 2023–24 and $0.7 billion in 2024–25, an improvement of $4.3 billion and $6.9 billion, respectively, relative to the outlook presented in the 2022 Budget.

Revenue Outlook Over the Medium Term

Key inputs included in the revenue forecast are:

• A prudent economic outlook based on private-sector forecasts;
• Existing federal–provincial agreements and funding formulas; and
• The business plans of government ministries, business enterprises and service organizations.

Details of the revenue outlook are outlined later in this document. See Chapter 3: A Strong Foundation for the Next Generation: Ontario’s Fiscal Plan and Outlook for more details.

Program Expense Outlook Over the Medium Term

The government is building a strong fiscal foundation while continuing to invest in critical public services. In 2022–23, base program expense is projected to increase by $18.1 billion compared to 2021–22, with an increase of $5.6 billion for health and $3.6 billion for education.

Between 2022–23 and 2024–25, base program expense is projected to increase every year, growing at an average annual rate of 2.9 per cent as the government continues to invest in critical programs in health care, education, social services and skills training. COVID‑19 Time-Limited Funding is projected to be phased out by 2023–24, from $7.5 billion in 2022–23. The government also maintains significant contingencies within its program expense outlook to manage unforeseen risks.

Ontario continues to maintain a flexible plan in the face of ongoing economic uncertainty and risks, while ensuring that supports are in place for people and businesses.

See Chapter 3: A Strong Foundation for the Next Generation: Ontario’s Fiscal Plan and Outlook for further details on the program expense outlook over the medium term.

Other Fiscal Planning Assumptions

The reserve is set at $1.0 billion in 2022–23 and $1.5 billion each year over the medium term, 2023–24 and 2024–25.

Net debt-to-GDP for 2022–23 is projected to be 38.4 per cent, 3.0 percentage points lower than the 41.4 per cent forecast in the 2022 Budget and 0.8 percentage points lower than in 2021–22. Over the medium term, the net debt-to-GDP ratio is forecast to be 38.7 per cent in 2023–24 and 38.3 per cent in 2024–25.

Economic and Fiscal Outlook Scenarios

While the government’s planning assumptions for economic growth are reasonable and prudent based on available private-sector forecasts, the current economic uncertainty and a broad range of risks could result in economic growth being relatively stronger or weaker. See Chapter 2: Economic Performance and Outlook, for more details.

In order to illustrate the high degree of economic uncertainty, the Ontario Ministry of Finance has developed Faster Growth and Slower Growth scenarios that the economy could take over the next several years. These alternative scenarios should not be considered the best case or the worst case. Rather, they represent possible outcomes.

In the event that the alternative economic scenarios materialize, as opposed to the Planning Projection, Ontario’s fiscal plan would also change as a result.

Under the Faster Growth scenario, the deficit outlook may improve to $10.4 billion in 2022–23, $0.9 billion in 2023–24 and reach a surplus of $9.2 billion in 2024–25. However, under the Slower Growth scenario, the deficit outlook may deteriorate to $14.6 billion in 2022–23, $13.9 billion in 2023–24, and $8.5 billion in 2024–25. These economic challenges underscore the need for a responsible and flexible fiscal plan to respond to uncertainty and risk. See Chapter 3: A Strong Foundation for the Next Generation: Ontario’s Fiscal Plan and Outlook, Economic and Fiscal Outlook Scenarios section for more information.

Borrowing and Debt Management

Ontario’s long-term public borrowing for 2022–23 is now forecast to be $32.2 billion, $9.3 billion less than the 2022 Budget forecast. This is primarily due to the stronger financial results reported in the Public Accounts of Ontario 2021–2022, lower than forecast deficit for 2022–23, and pre-borrowing for 2023–24. As of October 14, 2022, Ontario had completed $18.6 billion, or 58 per cent of its 2022–23 total long-term public borrowing program. Ontario’s borrowing program is also driven by a historic capital plan. See the section titled A Capital Plan for a Stronger Ontario, for more details.

Ontario is forecast to pay $13.6 billion in interest costs in 2022–23, up from the 2022 Budget forecast of $13.5 billion as a result of higher than projected interest rates.

Interest on debt in 2023–24 and 2024–25 is forecast to be $14.5 billion and $14.9 billion, respectively, higher than the forecast in the 2022 Budget by $0.2 billion in 2023–24 and $0.1 billion in 2024–25.

Ontario’s overall borrowing needs have been reduced by $26.1 billion over the three-year outlook period compared to the 2022 Budget forecast. Had the borrowing program stayed the same as in the 2022 Budget forecast, given higher interest rates forecast today, interest on debt would have been $0.2 billion higher in 2022–23, $0.7 billion higher in 2023–24 and $1.0 billion higher in 2024–25.

A one percentage point change in interest rates either up or down from the current interest rate forecast is estimated to have a corresponding change in Ontario’s borrowing costs by around $650 million in the first full year, if the size of the borrowing program remains unchanged from the current projection.

The net debt-to-GDP ratio in 2022–23 is now projected to be 38.4 per cent, or 3.0 percentage points lower than the 41.4 per cent forecast in the 2022 Budget and 0.8 percentage points lower than in 2021–22. This was due to lower than previously projected deficits and higher nominal GDP growth. Over the medium-term outlook, the net debt-to-GDP ratio is projected to remain lower than the forecasts contained in the 2022 Budget. This reflects the government’s responsible approach to fiscal policy.

As described earlier in the Economic and Fiscal Outlook Scenarios section, in the event that alternative economic scenarios materialize, Ontario’s borrowing requirements in the next three years would also change as a result. Under the Faster Growth scenario, long-term borrowing would decrease by a total of $19.6 billion over the three-year outlook period, while under the Slower Growth scenario, long-term borrowing would increase by $15.3 billion over the same period.

A Capital Plan for a Stronger Ontario

The government’s capital plan is one of the most ambitious in the province’s history, with planned investments over the next 10 years totalling $159.3 billion, including $20.0 billion in 2022–23. This plan is getting shovels in the ground to build highways, hospitals and other critical assets, laying the foundation for a stronger and more productive Ontario. 

Key highlights in the capital plan include:

Highways

$25.1 billion over 10 years to support the planning and/or construction of highway expansion and rehabilitation projects across the province, including projects such as:

• Highway 413, a new 400-series highway and transit corridor across Halton, Peel and York regions to support the movement of goods and save drivers up to 30 minutes on their commute, as well as bring relief to the most congested corridor in North America;
• The Bradford Bypass, a new four-lane freeway connecting Highway 400 and Highway 404 in Simcoe County and York Region that is expected to ease gridlock on Highway 400 and local roads, and save commuters up to 35 minutes per trip as well as enhance the movement of goods and people along strategic trade corridors;
• The QEW Garden City Skyway rehabilitation project, which will include a new twin bridge over the Welland Canal connecting St. Catharines to Niagara-on-the-Lake. This work will keep traffic moving on this strategic trade and economic corridor that links international border crossings with the Greater Golden Horseshoe;
• Early works such as bridge replacements in Oshawa and Port Hope, as the first step to enable future widening of Highway 401 to relieve congestion starting at Brock Road in Pickering and through Eastern Ontario;
• Continuing the next phase of construction for the new Highway 7 between Kitchener and Guelph, which will provide relief to the gridlocked Highway 401 and connect the fast-growing urban centres of Kitchener, Waterloo and Guelph;
• Widening of Highway 17 from Arnprior to Renfrew to four lanes, which will increase capacity as well as enhance road safety for travellers by separating opposing traffic and providing additional passing opportunities; and
• The Timmins Connecting Link to reconstruct an approximate 21.4-kilometre stretch of Highway 101, which is used by 25,000 vehicles per day and will improve the movement of people and goods in Northern Ontario.

Transit

$61.6 billion over 10 years for public transit, including:

• Breaking ground on the Ontario Line, which will provide rapid transit between Exhibition/Ontario Place and the Ontario Science Centre, connecting more than 40 other transit routes, including GO train lines, existing Toronto Transit Commission (TTC) subway and streetcar lines, and the Eglinton Crosstown Light Rail Transit line;
• The Bowmanville GO Rail Extension, which will expand GO Transit rail services from Oshawa into Bowmanville on the Lakeshore East corridor and help reduce gridlock;
• Planning and design work for a future connection of the Eglinton Crosstown West Extension to Toronto Pearson International Airport, to establish connectivity of the line to the airport and one of Ontario’s largest economic and employment zones;
• Advancing planning work for the Sheppard Subway Extension that will connect the existing terminus at Don Mills Station (TTC’s Line 4) with the future Scarborough Subway Extension, delivering smarter, better and faster transit; and
• Transforming the GO Transit network into a modern, reliable and fully integrated rapid transit network, including electrifying core segments of the network. GO Expansion will bring two-way, all-day GO train service across key parts of the network, reduce emissions, and cut down commute times across the province by steadily increasing service with faster trains, more stations and seamless connections.

Health

More than $40 billion over the next 10 years in hospital infrastructure. These investments will build new health care facilities and renew existing hospitals and community health centres. This includes supporting more than 50 major hospital projects that would add 3,000 new beds over 10 years. Significant investments are being made to support major hospital projects including:

• Transformation of the existing site and urgent care centre into a new 24/7 inpatient care hospital at Peel Memorial in Brampton, in partnership with the William Osler Health System. This will allow development of an emergency department and meet the evolving needs of one of Ontario’s fastest growing communities;
• Support for the redevelopment of the existing hospital and regional trauma centre on a new site for the Ottawa Hospital – Civic Campus to expand access to programs and services as well as meet bed capacity needs;
• Support for a new state-of-the-art acute care hospital in Windsor and Essex County to replace aging infrastructure, add more hospital beds and expand services in the region;
• Funding for the redevelopment of acute care hospitals in Huntsville and Bracebridge to improve community services and access to diagnostic imaging;
• Funding for the planning of the Grand River Hospital and St. Mary’s General Hospital Joint Redevelopment Project to modernize and expand hospital services in the Kitchener-Waterloo region;
• Support to expand the cardiovascular surgery program at Thunder Bay Regional Health Sciences Centre to address surgical wait times and improve access to lifesaving care;
• Funding to support the single largest hospital infrastructure investment through the Trillium Health Partners – Broader Redevelopment project to build a new, state-of-the-art Mississauga Hospital and expand the Queensway Health Centre;
• Continued support for the construction of a new, modern hospital facility on the existing Uxbridge site at the Oak Valley Health – Uxbridge Hospital to replace the current aged building, and enable the expansion of specialized outpatient clinics as well as the creation of a community health hub with long-term care services;
• Support for the Stevenson Memorial Hospital redevelopment to modernize facilities, support service delivery and respond to future population growth in Simcoe County;
• Funding for the modernization of the new diagnostic imaging, laboratory and emergency departments at the Wallaceburg Sydenham Hospital, part of the Chatham-Kent Health Alliance, to modernize service delivery; and
• Expansion of the Scarborough Health Network – Birchmount site with a new inpatient tower and an expanded emergency department to reduce wait times, improve patient flow and update aging infrastructure.

Long-Term Care

• Construction of four new long-term care homes through the Accelerated Build Pilot. On February 1, 2022, Ontario celebrated the completion of Lakeridge Gardens in Ajax, right beside the Ajax-Pickering hospital. Construction is underway for the remaining three long-term care homes in Mississauga and Toronto under the Accelerated Build Pilot; and
• Planned investments that total a historic $6.4 billion since 2019 to support the government’s commitment, to build more than 30,000 new and upgrade over 28,000 long-term care beds across the province by 2028 to modern design standards. Ontario now has over 31,000 new and 28,000 upgraded beds in development.

Broadband

• Nearly $4 billion beginning in 2019–20 to support the government’s commitment to provide high-speed internet access to every community in Ontario by the end of 2025. In winter 2022, the government concluded a new competitive process and as a result, signed agreements with eight internet service providers to bring access to up to 266,000 homes and businesses in as many as 339 municipalities across Ontario.

Additional Projects

• Investing $21 billion, including about $14 billion in capital grants over the next 10 years, to support the renewal and expansion of school infrastructure and child care projects, including the H.M. Robbins Public School addition in Sault Ste. Marie, a new English public elementary school in Brampton and a new French Catholic elementary school in Kemptville.
• Almost $6 billion in the Postsecondary Education sector, including over $2 billion in capital grants over the next 10 years, to help colleges, universities and Indigenous Institutes modernize classrooms by upgrading technology, carrying out critical repairs and improving environmental sustainability.

Chart Descriptions

Chart: Ontario Fiscal Outlook Scenarios

The bar chart illustrates the range of Ontario deficit outlooks based on the two alternative economic scenarios presented in Chapter 2: Economic Performance and Outlook. The 2022 Ontario Economic Outlook and Fiscal Review deficit outlook estimates the deficit to be $12.9 billion in 2022– 23, $8.1 billion in 2023–24 and $0.7 billion in 2024–25. Under the Faster Growth scenario, the deficit is estimated to be $10.4 billion in 2022–23, $0.9 billion in 2023–24 and reach a surplus of $9.2 billion in 2024– 25. Under the Slower Growth scenario, the deficit is estimated to be $14.6 billion in 2022–23, $13.9 billion in 2023–24 and $8.5 billion in 2024–25.

Source: Ontario Ministry of Finance.

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Chart: Net Debt-to GDP

Ontario’s net debt-to-GDP ratio is forecast at 38.4 per cent in 2022–23.

Year	Net Debt-to-GDP (%)
1990–91	13.4
1991–92	17.1
1992–93	21.1
1993–94	26.6
1994–95	28.3
1995–96	30.1
1996–97	31.2
1997–98	30.5
1998–99	29.4
1999–00	32.1
2000–01	29.3
2001–02	28.2
2002–03	26.8
2003–04	27.5
2004–05	26.8
2005–06	27.8
2006–07	27.1
2007–08	26.6
2008–09	27.8
2009–10	32.3
2010–11	34.5
2011–12	36.6
2012–13	38.2
2013–14	39.7
2014–15	40.5
2015–16	40.3
2016–17	39.7
2017–18	39.3
2018–19	39.4
2019–20	39.6
2020–21	43.1
2021–22	39.2
2022–23	38.4
2023–24	38.7
2024–25	38.3

Sources: Statistics Canada andOntario Ministry of Finance.

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Chart: Borrowing Outlook Scenarios for Long-Term Borrowing

($ Billions)

Year	2021–22	2022–23	2023–24	2024–25
Planning Projection	$41.1	$32.2	$38.4	$32.3
Slower Growth Scenario	$41.1	$33.8	$44.2	$40.2
Faster Growth Scenario	$41.1	$29.7	$31.2	$22.4

Sources: Ontario Financing Authority andOntario Ministry of Finance.

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