On June 25 th the Financial Accountability Office of Ontario (FAO) released a Commentary report titled “Addressing the Impact of an Economic Downturn on Ontario’s Finances”. The report makes the case that recessions are inevitable and demonstrated how a moderate recession would negatively impact the financial status of the government of Ontario. Key points from the report are as follows:
  • The FAO forecasts slower but steady economic growth in Ontario over the next 5 years
  • However, if there is even a moderate recession, the government’s road to balance is vulnerable
  • The road to balance relies significantly upon economic growth
  • Two factors place the Ontario economy at risk: 1) the high levels of household debt; 2) global trade tensions. 
  • In their report, the FAO modelled a moderate downturn in 2020 and full recovery in 2023
  • The model assumed decreased government revenues during the period of recession and increased spending on employment programs and social services
  • The model produced a deficit ballooning from $10.8B to $16.5B in 2021/22
  • In 2023/24, the year in which the government plans to balance, the model produced a deficit of over $4B
  • Ontario would accumulate additional debt of almost $31B by 2023/24