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Ontario’s deficit is expected to quadruple to $41 billion in 2020-2021 due to the partial economic shutdown associated with the COVID-19 coronavirus pandemic, according to a report by the Financial Accountability Office (FAO).
The FAO released their Spring 2020 Economic and Budget Outlook on Monday.
"The report shows that the partial shutdown of the Ontario economy due to the COVID-19 pandemic will deliver a severe blow to the province's revenues, increase spending, and result in substantially higher deficits and debt," said the FAO in a press release.
The report said the deficit will become the largest in Ontario's history. Ontario's previous record deficits were $19.3 billion in 2009-2010 and $12.4 billion in 1992-1993.
The report said the province's net debt-to-GDP ratio will jump to a record 48.7 per cent from 39.9 per cent.
"Even as the economy recovers through 2021, Ontario’s debt burden would remain elevated at 48.7 per cent of GDP next year," said the report.
Ontario's GDP is projected to decrease by 9 per cent in 2020, the largest annual decline on record.
Ontario's revenue is projected to drop by 14 per cent to $133 billion in 2020-2021, which is larger than the revenue decline during the 2008 global financial crisis.
The FAO claimed Ontario’s economic recovery will rely on "success of the pandemic containment measures and the pace at which the economy can be safely reopened."
"Assuming the pandemic shutdown is gradually eased through the summer, the FAO projects that Ontario’s economy will steadily strengthen into 2021, helping to reduce the budget deficit to $25.3 billion in 2021-22," said the report.
The FAO warns that if economic recovery takes longer than expected, the debt could increase more.
"There is significant risk that reopening the economy could take longer than expected due to continued public health concerns," they said. "If Ontario’s economic recovery is delayed, budget deficits and provincial debt would be much higher, pushing Ontario’s net debt-to-GDP ratio above 52 per cent next year."