April 07, 2021 | 17:59
Fiscal Outlook Stabilizes
The Province of Manitoba is projecting a $1.6 billion summary budget deficit in FY21/22, slightly improved from the $2.1 billion now expected for FY20/21. That weighs in at a modest 2.0% of GDP, and sits at the lower end of the provincial pack. Looking ahead, the Province expects the deficit to decline sharply next fiscal year, to just $374 million (or 0.4% of GDP), as revenues continue to rebound and spending falls off meaningfully as pandemic-related measures wind down.
This budget largely builds on past efforts, rolling out more COVID-related funding and a few other modest measures. Net tax changes in this budget amount to small relief of $198 million for FY21/22.
Summary of Major Policy Measures
In what's becoming a theme among the provinces, Manitoba's budget is based on a conservative economic outlook, as the consensus has been steadily improving since these numbers were locked in. The government expects real GDP to rebound 4.1% this year and to grow another 3.6% in 2022. Our current outlook is for 5.7% growth in 2021 and 4.0% next year. The Province lays out two alternate scenarios (above-average growth and below-average growth). While the details underlying those scenarios are lacking, our outlook likely sets the fiscal path closer to the above-average case. Note that under that scenario, the budget could be balanced by FY22/23.
Total revenue is expected to rise 2.1% in FY21/22, led by a bounce in personal and corporate income tax receipts. Federal transfers will fall off notably after temporary emergency funding in 2020 fades. Meantime, total spending will dip 0.6% as COVID-related spending falls by almost $800 million. While COVID cases continue to rise across much of the country, the Province has built in $1.18 billion of COVID-related and contingency funding into the FY21/22 forecast, which leaves some room to maneuver.
While the estimates are subject to much uncertainty, total borrowing requirements are pegged at $4.9 billion in FY21/22, after factoring in $771 million in pre-funding. Refinancing makes up $2.7 billion of that total. Government business enterprises (mainly Manitoba Hydro) will account for $1.3 billion of the total borrowing, with $0.7 billion in refinancing.
Summary net debt will rise to $30.0 billion this year, from $27.6 billion at the end of FY20/21. That weighs in at 39.9% of GDP, up 1.1 ppts from the prior year. Still, Manitoba's debt burden is holding comfortably below Ontario and Quebec as it has deteriorated less thorough the pandemic, and it will peak this fiscal year.
The Bottom Line: Manitoba is usually the steadiest province during economic storms and, while it certainly was not spared by the pandemic, its fiscal situation has held up relatively well versus it's larger peers.