Ontario will likely have a tougher time returning to a balanced budget position than Quebec will, says Moody’s Investors Service in a new report.
The rating agency says that Ontario, which plans to achieve a balanced budget in 2017/2018, is in a more challenged position than Quebec, which aims to be in balance by 2015/2016, because its debt burden has been rising since 2009, it faces larger ongoing deficits, and there is a risk that all the cost controls designed to return Ontario to balance may not be carried out.
“Ontario’s persistently large deficits, and its tendency to delay the most significant cost cutting measures towards the latter years of its projected timeline for returning to a balanced budget, increase the risk that the province will be unable to achieve its goal,” says Michael Yake, vice president and senior analyst at Moody’s.
Moody’s reports that Ontario’s debt burden continues to increase, albeit at a slowing rate, to cover persistent budget deficits. It forecasts debt as a proportion of revenue to exceed 240% in 2015 and it expects the province’s debt burden to remain elevated for several years after balanced budgets are reached due to large planned infrastructure spending.
Conversely, it says that Quebec has been stable and consistent in the management of its debt. Both Quebec and Ontario have experienced revenue shortfalls because the pace of economic recovery has been slower than expected over the past couple of years, it notes.