As COVID-19 sends global stock markets and oil prices plunging, the Doug Ford government is bracing for the effects on Ontario’s economy and the impact on the provincial budget, to be delivered in just two weeks.
The spread of the new coronavirus around the world has brought just 36 cases to Ontario so far, according to public health authorities, a far lower number than other more hard-hit jurisdictions.
Still, the premier is expressing worry about the potential economic fallout from COVID-19 as some countries restrict movement of large parts of the population, travellers decide against international trips, large gatherings such as conferences and sporting events are cancelled, and employees take precautionary sick days to avoid infection.
“The area that I’m concerned is our economy with COVID-19,” Ford said Monday in an unscripted comment at an event in Kitchener.
“The worst thing to do is put a scare out there,” Ford added. “But we have to be cautious and we’re all over this.” He did not offer details of his economic concerns and was not available to take questions from reporters after the event.
“Clearly, COVID-19 is having economic impacts in Ontario,” Finance Minister Rod Phillips told reporters at the Legislature later Monday. “We are working diligently to be aware of its impacts and respond to them as required.”
Phillips is sticking with his timetable for delivering his first budget on March 25. With the novel coronavirus casting doubt on recent forecasts for economic growth, predicting government revenues for the coming fiscal year will be a challenge.
“We’re in a very dynamic environment,” Phillips said. “Obviously, we’ll have to look to what the economic impacts are. We don’t really know at this time exactly what that is going to be.”
A one percentage point drop in growth for Ontario’s GDP knocks some $700 million out of the government’s annual revenues.
Ontario’s economy grew by 1.7 per cent in 2019 and the average growth forecast for 2020 by private sector economists has been sitting at 1.7 per cent. But those 2020 forecasts could be revised downward.
“Ontario is in a strong position,” said Phillips, pointing to strong job growth over the past year. “One of the reasons that we’ve put in place the balanced, prudent plan we have is so that we could make adjustments if they were necessary,”
He said the government remains committed to balancing the budget in 2023.
The novel coronavirus is “likely to dampen economic activity in Canada including in Ontario, but at this stage we’re not quite sure the degree to which we’ll be hit here,” said Robert Hogue, senior economist with RBC, in an interview Monday.
“It really drives home the point that governments should have some wiggle room embedded into their budget,” said Hogue.
“It’s always difficult to forecast with precision what the economy is going to be like and as well how much revenue the government can generate, Hogue said.
“But also there’s always the potential for some kind of unexpected hit to the economy like we are potentially witnessing right now with the coronavirus.”
RBC’s 2020 economic outlook for Ontario — issued in December before the new coronavirus had spread beyond China, — suggested “the souring of the global trade environment” would be the chief drag on the province’s economy.
A year ago, Ford said in a speech: “The risk of a carbon tax recession is very, very real.”
That didn’t happen in 2019. But in 2020, the global economy may face the risk of a coronavirus recession, and Ontario could get swept along with it.