Ontario's projected deficit will grow to a record $38.5 billion this year
TORONTO -- Ontario's projected deficit will grow to a record $38.5 billion this year, as the province takes a significant financial hit from the effects of COVID-19, forcing the government to increase its pandemic rescue package to $30 billion in 2020-2021.
The economic update is the first look at the impact of COVID-19 on Ontario's finances and how the government's initial pandemic spending plan assisted businesses and residents during the past five months.
During the height of the pandemic, with more than a million people out of work in Ontario, provincial tax revenues dropped by $10.7 billion, largely owing to declines in personal income and corporate tax revenue, as well as lower income from the gasoline and fuel tax.
However, the province's net decline in revenue comes in at $5.7 billion, thanks to $6.2 billion in transfers from the federal government.
At the same time the province's program spending saw a dramatic $13.1 billion increase, to a total of $30 billion, which includes:
- $2.4 billion for municipalities and transit (paired with $1.7 billion from the federal government as part of the Safe Restart agreement)
- $1.5 billion for the temporary pandemic pay program ($1.1 billion from the federal government, $424 million from the province)
- $610 million to purchase personal protective equipment for healthcare workers
- $218 million for Long-Term Care, to increase capacity in the sector during the pandemic, and protection for staff
- $176 million for to provide hydro users around-the-clock off-peak electricity prices
- $241 million contribution for the Canada Emergency Commercial Rent Assistance program for small businesses
Ontario's economy is expected to a significant hit in 2020 with Gross Domestic Product (GDP) expected to decline by 6.6 per cent, which is "the largest annual real GDP decline on record."
The province also said the pace the of economic recover "cannot be predicted with certainty" even as the pandemic related restrictions have been eased.
One of the reasons behind a slower-than-expected recovery, the government said, is the high infection rate in the United States which could impact exports, supply chains and consumer confidence.
To help businesses deal with the extended closures the province is extending its tax deferral policy for another month, giving businesses until October 1, 2020 to pay their taxes.
The government says the exemptions would apply to: Employer Health tax; Tobacco tax; Fuel tax; Gas tax; Beer, Wine and Spirits tax; Mining tax; Insurance Premium tax; International Fuel Tax and the Race Tracks tax.
The government's next fiscal update will come in November during a multi-year budget to be delivered by Finance Minister Rod Phillips.