The Ontario government expects economic growth and job creation to slow significantly in 2023 and 2024 as the province navigates global headwinds such as inflation and interest rates.
Short-term uncertainty is the theme of Ontario’s 2022 economic statement, which was presented by Finance Minister Peter Bethlenfalvy on Monday. The fiscal plan projects deficit reduction – nearly balanced by 2025 – and includes several new tax measures aimed at small businesses and seniors, and changes to the Ontario Disability Support Program (ODSP).
It also features a significant downward revision in GDP growth compared to the 2022 budget passed in August.
The government predicts 0.5 percent in 2023, 1.6 percent in 2024 and 2.1 percent in 2025. .
A similar trend is expected for employment growth. While the province gained about 324,000 jobs this fiscal year, that is expected to drop to just 38,000 next year — down 153,000 from August’s budget. The finance minister predicts about 100,000 jobs will be created in 2024 and about 117,000 in 2025.
In a technical briefing for the media, senior officials said the revision in GDP and job growth was a sign of “rising economic uncertainty” fueled by rising interest rates because the central bank is trying to keep inflation down. They added that, taken together, private sector forecasts suggest a recession is likely in the coming years.
The autumn economic outlook includes a more bearish forecast for the province’s deficit. The government plans a deficit of $12.9 billion for 2022-2023, about $7.9 billion lower than previously stated in the budget. The reduction is due to higher-than-expected tax revenues and higher GDP growth this year.
The deficit is expected to drop to $8.1 billion in 2023-2024 and $700 million the following year.
Public accounts released by the province in August showed a $2.1 billion surplus for the 2021-2022 fiscal year, but finance officials said Monday that those accounts does not include “forward looking” factors.
New taxes, affordable measures
In the fall economic statement, the government is proposing to raise the monthly income exemption for Ontarians on disability support to $1,000, up from $200. This means that ODSP recipients who have a job get to keep more of their paychecks.
The Ministry of Finance estimates that the measure will help about 25,000 people, and could encourage another 25,000 ODSP people to join the workforce.
Ontarians at ODSP told CBC Toronto that the The current exemption rate may be discriminatory looking for a job.
The fiscal outlook also provides about $760 million to ensure that basic benefits for ODSP recipients are tied to inflation starting in July 2023 — a promise made by the previous government did not finance.
The government has also pledged to double the annual guaranteed payment for low-income seniors for one year, starting in January. This would increase the maximum wage for single seniors to $166 per month, and $332 per month for married couples.
At the same time, the province is introducing tax relief for some companies. The legislation proposed today would expand the tax limit for small businesses from $10 million to $50 million in taxable capital. Today, the average is about 15 million dollars.
On the eve of the fall economic statement, Prime Minister Doug Ford announced that the 5.7-cent gas tax cut that began in July will be extended by one year until the end of 2023.