Ontario released its fall economic statement this week and the government insists that it will be balancing the budget by 2017-18.  From an actual deficit of 9.2 billion dollars for 2012-13, it is anticipated that the deficit will be 11.7 billion dollars in 2013-14 and will go down to 3.5 billion dollars by 2016-17.  Yet, between 2012-13 and 2013-14, revenues are anticipated to rise 3.1 percent and expenditures will rise 4.1 percent.  The short term forecasts a growing rather than shrinking gap.

For revenues to rise faster than spending, Ontario is banking on an increase in the growth rate of the economy.  Real annual GDP growth was 1.8 percent in 2011, 1.5 percent in 2012 and is currently forecast at 1.4 percent for 2013.  It then is expected to rise to 2.2 percent in 2014, 2.6 percent in 2015 and 2.6 percent in 2016.  This desperately needed uptick is already below what was forecast in the 2013 budget. Ontario is hoping a massive infrastructure program will jump start its economy.  The wish for something to happen is understandable given Ontario's dismal recent economic performance in the wake of the 2009 recession.

The economic indicators for 2011 and 2012 (see Figure) show that many Ontario economic indicators have been showing a reduced performance and indicate a slowing economy.  The only thing that is growing faster than the previous year in the above figure is housing starts.  Given that real GDP, exports, private sector investment and household income are showing reduced growth rates, it suggests that only additional private sector household debt and low interest rates are keeping the housing sector going. If the anticipated uptick in growth turns out to be wishful thinking, Ontario is in for a tough future.

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