2017-18 First Quarter Finances

Introduction

The Ontario Quarterly Finances contains updated information about Ontario's 2017–18 fiscal outlook, including updated information about the major components of revenue and expense as set out in the 2017 Budget.

Section A: 2017–18 Fiscal Outlook

The government is continuing to project a balanced budget in 2017–18, unchanged from the 2017 Budget forecast. A balanced budget means that Ontarians will continue to benefit from expanded services and more assistance with everyday costs. These include covering the costs of pharmacare for children and youth under OHIP+, providing electricity cost relief, and helping 100,000 more children access affordable, quality licensed child care.

Stronger-than-expected economic activity in the January to March quarter of 2017 has lifted private-sector forecasts for Ontario real GDP growth in 2017. The Ontario economy is benefiting from a growing economy in the United States, low oil prices and a competitive Canadian dollar. The outlook for 2017 real GDP growth in the rest of Canada has also been revised upward.

New investments being reported in the 2017–18 First Quarter Finances include funding for research and remediation of the English-Wabigoon River system, compensation for flooding of Lac des Mille Lacs First Nation reserve land, support for international famine relief efforts, and investments under the early learning and childcare bilateral agreement with the federal government.

Further details on the Province's fiscal plan will be provided in future fiscal updates.

2017–18 In-year fiscal performance

Note: Numbers may not add due to rounding.

Total revenue is projected to be $141.8 billion, slightly higher than the 2017 Budget plan, reflecting $145.0 million in new revenue as a result of the bilateral agreement between Ontario and the federal government for early learning and childcare.

The outlook for program expense is $129.6 billion, also slightly higher than the 2017 Budget plan, reflecting a corresponding increase of $145.0 million for investments resulting from the bilateral agreement between Ontario and the federal government for early learning and childcare.

The Province's interest on debt expense forecast, at $11.6 billion, is unchanged from the 2017 Budget forecast.

The 2017–18 outlook also maintains a $600 million reserve to protect the fiscal outlook against unforeseen adverse changes in the Province's revenue and expense, including those resulting from changes in Ontario's economic performance.

Ontario's net debt-to-GDP ratio is expected to be 37.5 per cent in 2017–18, unchanged from the 2017 Budget forecast.

Section B: Details of in-year changes

Revenue

The 2017–18 revenue outlook, at $141.8 billion, is $145.0 million higher than the 2017 Budget forecast due to new funding for early learning and childcare as a result of a bilateral agreement between Ontario and the federal government.

At this point in the year, there are a broad range of risks that could materially affect the 2017–18 revenue outlook. Stronger economic growth in 2017 could support stronger revenue growth. Other risks include those related to the processing of 2016 tax returns and updated entitlements under the Harmonized Sales Tax and federal transfer payment programs. The government will continue to monitor economic and revenue developments and will provide further details in future fiscal updates.

Expense

The 2017–18 total expense outlook, at $141.2 billion, is an increase of $145.0 million from the 2017 Budget forecast. Since the 2017 Budget, a number of program expense changes have occurred and have been accommodated within the fiscal plan.

Key changes to program expense projections to be offset from the contingency funds include:

• An increase of $2.7 million for research and $85.0 million for remediation of the English-Wabigoon River system from mercury contamination, to be undertaken in partnership with First Nations and stakeholders.
• An increase of $14.8 million as part of the Lac des Mille Lacs flooding claim settlement in compensation for flooding of Lac des Mille Lacs First Nation reserve land.
• An increase of $2.5 million for famine relief efforts in Yemen, South Sudan, Somalia and Nigeria.

Other key changes to program expense projections include:

• An increase of $145.0 million under the early learning and childcare bilateral agreement to increase the accessibility and affordability of high-quality licensed child care and quality early learning opportunities, which is offset by an increase in federal revenue.
• A transfer of $3.1 million from the Ministry of Tourism, Culture and Sport to various partner ministries to revitalize communities and celebrate Ontario's 150th anniversary.
• A transfer of $8.5 million from the Ministry of Advanced Education and Skills Development to partner ministries for Equitable Access to Postsecondary Education, to support student access and success.
• A transfer of $1.0 million from the Ministry of Finance to the Ministry of Tourism, Culture and Sport to improve digital resources and services in rural, remote and First Nation public libraries, which was one of the top three ideas selected for Budget Talks during consultations for the 2017 Budget.
• A transfer of $0.5 million, as part of Ontario's Action Plan for Reconciliation, from the Ministry of Indigenous Relations and Reconciliation to Cabinet Office to further support the development of an Indigenous-focused anti-racism strategy.
• A transfer of $0.3 million from the Ministry of Citizenship and Immigration to Cabinet Office to support disaster relief efforts in Italy in response to a series of earthquakes last year.

Interest on debt expense at $11.6 billion is unchanged from the 2017 Budget forecast.

Fiscal prudence

The 2017 Budget included a $600 million reserve in 2017–18 to protect the fiscal outlook against adverse changes in the Province's revenue and expense. The current fiscal outlook maintains the $600 million reserve.

The current outlook also maintains contingency funds to help mitigate expense risks — particularly in cases where health and safety may be compromised or services to the most vulnerable are jeopardized — that may otherwise adversely affect Ontario's fiscal performance.

Section C: Ontario's economic outlook

As of July 18, 2017, private-sector forecasters, on average, project Ontario's real GDP to increase by 2.7 per cent in 2017, up from the 2.4 per cent advance at the time of the 2017 Budget. The outlook for growth in 2018 is unchanged at 2.2 per cent.

In July, the International Monetary Fund's World Economic Outlook Update projected growth for the world economy of 3.5 per cent in 2017, slightly stronger than the forecast at the time of the 2017 Budget. The improved outlook reflects slightly stronger forecasts for both advanced and emerging market economies. However, the average forecast for 2017 real GDP growth in the United States, Ontario's largest trading partner, has moved slightly lower, to 2.2 per cent.

Section D: Economic performance

Ontario's economy continues to grow strongly. Real GDP advanced by 1.0 per cent in the first quarter of 2017 (January–March), with solid growth in business investment and consumer spending. Ontario's GDP growth outpaced Canada's and all other G7 countries in the first quarter. Over the 2014–16 period, Ontario's real GDP growth outpaced that of all G7 countries.

The strength of Ontario's economy has supported steady employment gains. Over the first half of 2017, employment increased by 91,000 net new jobs compared to the same period last year. This follows 76,400 net new jobs in 2016. The unemployment rate has also shown a marked improvement. As of June 2017, the unemployment rate was 6.4 per cent, below the national average for the 27th consecutive month.

Most key economic indicators, including manufacturing sales, retail sales and wholesale trade, have posted solid gains so far in 2017. After a very strong start to the year, housing market activity has moderated in recent months.

Ontario key economic indicators

[1] Per cent change from a year earlier; data not seasonally adjusted.

N/A = Data not available.

Sources: Statistics Canada, Ontario Ministry of Finance, Canada Mortgage and Housing Corporation and Canadian Real Estate Association.

Section E: Details of ontario's finances

Revenue

[1] Sales Tax revenue is net of the Ontario Sales Tax Credit and the energy component of the Ontario Energy and Property Tax Credit.

[2] Education Property Tax revenue is net of the Ontario Senior Homeowners' Property Tax Grant and the property tax component of the Ontario Energy and Property Tax Credit.

Note: Numbers may not add due to rounding.

Total expense

[1] Interest on debt is net of interest capitalized during construction of tangible capital assets of $292 million in 2017–18.

[2] As in past years, the Year-End Savings provision reflects efficiencies through in-year expenditure management and underspending due to factors such as program management, and changes in project startups and implementation plans.

Note: Numbers may not add due to rounding.

2017–18 Infrastructure expenditures

[1] Includes $292 million in interest capitalized during construction.

[2] Includes transfers to municipalities, universities and non-consolidated agencies.

[3] Includes third-party investments in hospitals, colleges and schools, and federal contributions to provincial infrastructure investments.

[4] Includes government administration, natural resources, culture and tourism sectors.

Note: Numbers may not add due to rounding.

Review of selected financial and economic statistics

[1] All years presented reflect recognizing jointly sponsored net pension assets for the Ontario Public Service Employees' Union Pension Plan (OPSEUPP) and Ontario Teachers' Pension Plan (OTPP) on the Province's financial statements.

[2] Interest on debt is net of interest capitalized during construction of tangible capital assets of $134 million in 2013–14, $202 million in 2014–15, $165 million in 2015–16, $121 million in 2016–17, and $292 million in 2017–18.

Note: Numbers may not add due to rounding.

Sources: Ontario Ministry of Finance and Statistics Canada.

Section F: Ontario's 2017–18 borrowing program

Borrowing program

Note: Numbers may not add due to rounding.

Borrowing program status (as at June 30, 2017)

Note: Numbers may not add due to rounding.

Long-Term Public Borrowing completed as at June 30, 2017 totalled $13.0 billion, as follows:

As of June 30, 2017, approximately 51 per cent of this year's borrowing was completed in Canadian dollars.

Ministry of Finance

For general inquiries regarding the 2017–18 First Quarter Finances, please call:

Toll-free English & French inquiries: 1-800-337-7222
Teletypewriter TTY: 1-800-263-7776

© Queen's Printer for Ontario, 2017

Chart description

Chart: Ontario Real GDP Growth

This bar chart shows the 2017 Budget forecast and private-sector average forecast for Ontario real GDP growth in 2017 and 2018. The 2017 Budget projected Ontario real GDP to rise by 2.3 per cent in 2017 and 2.1 per cent in 2018. As of July 18, 2017, private-sector forecasters, on average, projected Ontario real GDP to increase by 2.7 per cent in 2017, up from the 2.4 per cent increase expected at the time of the 2017 Budget. The private-sector forecast average for Ontario real GDP growth in 2018 is unchanged at 2.2 per cent.

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