Manitoba’s finance minister is forecasting a deficit of $1.123 billion for the province when the fiscal year ends in March 2022.
That’s close to a half-billion-dollar improvement from projections back in March. At that time, the province forecast it would end up in a $1.597-billion hole.
Scott Fielding announced the numbers during a 2021-22 mid-year update on Friday, saying the $474-million improvement is an encouraging sign the province is turning a corner in its economic recovery from the continuing pandemic.
“The economic recovery is underway in Manitoba but faces various challenges and ongoing volatility due to the pandemic,” he said.
“For 2021, Manitoba’s economy is forecasted to grow by 4.6 per cent … the largest annual increase since 1985.”
Fielding gave partial credit for that to the early adoption in Manitoba of vaccine passports, “which enabled businesses to resume operations and employees to return to the workplace safely.”
After losing more than 90,000 jobs in April 2020, the province has regained 86,100 net jobs as of November 2021.
The province now has the second-lowest unemployment rate in Canada at 5.1 per cent, Fielding said.
Revenue for the 2021-22 fiscal year is projected to be $18.327 billion, an increase of $489 million over the budget forecast of $17.838 billion, Fielding said.
Higher income tax assessments for the 2020 tax year and stronger retail sales tax revenue are the driving factors in that improvement, he said.
The increase in revenues, however, is offset somewhat by lower net income from Crown corporations, in particular a forecast net loss of $191 million by Manitoba Hydro.
That is due to drought conditions that have made it difficult for Hydro to generate enough electricity to meet its export budget.
As well, the province’s expenditures are projected to be $19.45 billion in 2021-22, $15 million higher than the March 2021 budget forecast of $19.435 billion.
Other factors that could influence the final economic outcome for the province are the increasing rate of inflation, which rose to 4.7 per cent in Manitoba in October, and higher interest rates, Fielding said.
“Anyone that goes, obviously, to the grocery store or goes to the [gas] pump knows that the costs have dramatically gone up,” he said.
Meanwhile, higher interest rates tend to slow economic activity by increasing the cost of borrowing for households, such as for mortgages, and on capital investments for businesses.
Asked what might happen if the Omicron coronavirus variant leads to shutdowns within the economy, Fielding said he believes the province is in a good position to handle it.
The 2021 budget included $1.18 billion for COVID-19 response and contingencies, of which $800 million has been allocated to government departments, leaving $381 million for the remainder of the year.
The consultation process for the 2022 budget is now underway, Fielding said, and he would like to see some additional pandemic contingency support in it.
“But that is part of the budget decisions we’re going to make,” he said.
NDP finance critic Mark Wasyliw didn’t respond kindly to Fielding’s mid-year budget update. He suggested new Premier Heather Stefanson is following her party’s pattern under Brian Pallister, which he said “intentionally underspent their health-care budget by millions of dollars every year.”
The full 2021-22 mid-year financial report can be read here.
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