Economic and Fiscal Update – March 25, 2020


March 25, 2020

Today, Ontario Minister of Finance Rob Phillips released the government’s March 2020 Economic and Fiscal Update, titled “Ontario’s Action Plan: Responding to COVID‑19”. This update takes the place of the traditional spring budget, which the government plans to deliver in November. The government’s primary goal is to provide additional resources to aide the health care sector’s response to the COVID-19 pandemic. It also focuses on providing assistance to families, workers and employers who may be impacted by economic disruption. Due to the current economic volatility, the government forewent the usual multi-year fiscal projections.

COVID-19 Response
The Action Plan dedicates an additional $17 billion in new supports to help Ontario respond to COVID-19. This includes $3.3 billion in new direct support for the health care sector, $3.7 billion direct support for people and jobs. Another $10 billion in support has been dedicated to help businesses with their cash flow.

The Province has also given itself considerable flexibility through unprecedented reserves and contingency funds. The Update includes a $2.5 billion reserve, a $1.3 billion contingency fund, and a $1 billion health care contingency fund.

Support for Businesses and Workers
The Province is giving businesses temporary tax relief amounting to $6 billion. Businesses will have a five-month window where they are free of penalties or interest on the majority of provincially administered taxes. The government will also increase the Employer Health Tax Exemption from $490,000 to $1 million for 2020.

Employers will also be able to defer their payments and reporting to WSIB until August 31, 2020, giving businesses a further $1.9 billion in relief. This includes payments for workplace injury and illness claims by Schedule 2 businesses.

To aide businesses in regions with below-average employment growth, the government has announced the Regional Opportunities Investment Tax Credit for capital investments. The 10% refundable Corporate Income Tax credit will be available to businesses that make expenditures up to $500,000 on construction, renovation and acquisition of commercial and industrial buildings.

To support workers affected by the COVID-19 pandemic, the government is committing $100 million to skills training programs through Employment Ontario. The Province also plans to work with the federal government to find ways to support apprentices and enable businesses to continue to retain skilled workers during the economic disruption.

Economic Outlook
The government makes it clear that conditions are too uncertain even for near-term growth forecasting, but for planning purposes, it is assuming a 0.0% GDP growth rate in 2020 and a 2.0% growth rate in 2021.

The Province is anticipating that with strong coordinated government support, growth will improve in the second half of 2020 and consumer, business and investor confidence will be lifted heading into 2021. Pent up demand and an improved labour market is expected to support strong consumer spending in 2021, and the Province expects low borrowing costs and continued immigration to stimulate increased home resales.

Due to the COVID-19 pandemic, Ontario is now planning for a $20.5 billion deficit in 2020-21. This is up from the $5.8 billion 2020-21 deficit that the Province had planned for in its 2019 budget.

Infrastructure Expenditure Outlook
The government did not make any major infrastructure announcements in the Economic and Fiscal Update but did provide its infrastructure expenditure plan for the coming fiscal year. Ontario is planning to spend $15.6 billion on infrastructure this year, including $4.8 billion on transit projects, $2.3 billion on education projects and $2.6 billion on hospitals. The total expenditure is down by about a billion from last year, but the government stresses that this not due to any cancellations, rather timing of planned major investments on projects such as the GO Rail Expansion and major hospital projects reaching substantial completion.

Ontario Infrastructure Expenditures 2019-2021

2019-20 (Interim) 2020-21 (Plan)
Transit $5.7B $4.8B
Provincial Highways $2.7B $2.6B
Hospitals $2.6B $2.1B
Education $2.6B $2.3B
Postsecondary Education $390M $634M
Justice $365M $615M
Total* $16.7B $15.6B

*Total includes smaller categories not included in this table

The full details of Ontario’s Economic and Fiscal Update can be found here: https://budget.ontario.ca/2020/marchupdate/index.html

You can find all relevant Covid-10 industry updates and previous OCS bulletins on our website here.

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