Ontario's Budget Update

By Fergal Smith

TORONTO (Reuters) – The Canadian province of Ontario announced a narrower budget deficit for the current fiscal year amid a slower-than-expected economic decline, according to a fiscal update presented on Wednesday.

Ontario, Canada's most populous province, forecasts a budget deficit of C$6.6 billion ($4.74 billion) for the 2024-25 fiscal year, a decrease from the C$9.8 billion deficit projected in the March budget.

A projected C$1.5 billion deficit is anticipated in 2025-26, before returning to a surplus by 2026-27. The fiscal year concludes on March 31.

The province, noted as one of the world's largest sub-sovereign borrowers, increased its revenue forecast by C$6.9 billion, totaling C$212.6 billion, while projecting a 0.9% economic growth in 2024, up from 0.3% but down from 1.4% in 2023. Expected growth is set to accelerate to 1.7% in 2025.

Ontario Finance Minister Peter Bethlenfalvy stated, "Our government's responsible approach has resulted in an improved fiscal position since the 2024 budget, allowing us to keep taxes low, invest in infrastructure like roads, highways, hospitals, and schools, and provide immediate relief to Ontario families as part of our plan to keep costs down."

The province will initiate a C$200 taxpayer rebate early next year for all eligible adult tax filers, with an additional C$200 for eligible children, projected to cost C$3 billion. This is aimed at alleviating the financial burden on families facing high interest rates.

Additional measures include extending temporary gas tax and fuel tax rate reductions, maintaining rates at nine cents per liter until June 30, 2025.

Since June, the Bank of Canada has lowered its benchmark rate by 1.25 percentage points to 3.75%, following previous increases to combat inflation.

The province plans to invest C$191.3 billion over the next ten years in critical infrastructure, with C$26.3 billion allocated for 2024-25.

The net debt-to-GDP ratio is expected to rise to 37.8% in the current fiscal year, from 37.3% in 2023-24; however, it remains lower than the previously estimated 39.2%. It is anticipated to rise slightly to 37.9% in 2025-26.

(Note: $1 = 1.3921 Canadian dollars)