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Moody’s continues to see risks in Ontario’s budget

first_img Share this article and your comments with peers on social media Keywords Ontario Ontario to deliver its second pandemic budget on March 24 See: Ontario budget: No new taxes or major spending cuts “Although the fiscal plan shows marginal improvements from previous forecasts, aided by lower than expected interest expense,” Moody’s says that it continues to see execution risks for the province in achieving its targets. “We remain attentive to the fact that deficits have shown little progress in the past few years, and in fact have increased from 8.1% of revenues in 2012-2013 to 9.2% in 2014-2015,” noted Michael Yake, Moody’s vice president and lead analyst for the province. “Achieving the budget’s goal of reducing the deficit to $8.5 billion (6.8% of revenue) in 2015-2016 would represent a positive step, but the return to balanced budgets by 2017-2018 still faces considerable risks in our view.” Moody’s notes that the province forecasts that program spending will remain flat from 2015-2016 to 2017-2018. Yet, over the past four years, spending has grown by 1.5% annually on average, it points out. To meet those spending control targets, the government is launching a review to find opportunities for efficiencies in its programs and services. The rating agency says that it will follow the progress of this review closely to assess its impact on the deficit targets. Additionally, the plan for returning to balance includes revenue growth from one-off sales of certain provincial assets, including a portion of Hydro One, along with stronger economic growth. Overall, revenues are expected to increase by 5.0% in 2015-2016, up from 2.2% growth in 2014-2015, Moody’s says. Driven by stronger economic growth, the province expects that tax revenues will increase by 5.7% in 2015-2016, followed by increases of 4.9% and 4.3% in the following two years, Moody’s says. Yet, these forecasts may prove optimistic, it says. “As we have previously noted for many Canadian provinces, since the 2009 recession provincial economic forecasts have tended to overestimate growth,” added Yake. “The global and Canadian economies continue to face downward risks. As such, we remain cautious on the province’s revenue forecast stemming from economic growth.” Ontario unlikely to balance budget by 2030: FAO Related newscenter_img Toronto home sales and home prices increased in April Ontario’s plan to return to fiscal balance by 2017-2018 looks a bit better following Thursday’s budget, but Moody’s Investors Service says that it still sees risks to the plan, which relies on spending control and improved economic growth. In a research note, Moody’s notes that Ontario’s latest budget continues to target a return to balance by 2017-2018, driven by cost restraint and increasing revenue growth due to stronger economic activity. Facebook LinkedIn Twitter James Langton last_img read more

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