Manitoba deficit forecast improves but still expected to reach historic highs due to pandemic

Manitoba's deficit is expected to reach historic highs by early spring due to the pandemic, though provincial outlooks suggest the deficit will be nearly $900 million less than projections earlier this fall.

The province released its mid-year economic and financial report Thursday, saying the government faced "significant uncertainty" in predicting the remaining months of the fiscal year because of the continued costs of COVID-19.

Despite that uncertainty, the provincial outlook forecasts a deficit of $2.048 billion by the end of March, down from the previous forecast of $2.938 billion in September. Federal transfers helped improve the situation, Premier Brian Pallister said.

"There's no playbook," he said. "We've cleaned the situation up as best we could."

That would still be the largest deficit in Manitoba history. The previous high of just over$1 billion came in 2011-12 as a result of the Assiniboine Riverflood response in 2011, a government spokespersonsaid.

Multi-year commitments for COVID-19are pegged at $3.2 billion. That includes$1.8 billion in expenditures in 2020-21.

The report out Thursday suggests spending soared $633 million above what was budgeted this year, including over $522 million to covercosts ofpersonal protective equipment and gear.

Revenues down$372M

Provincial revenue is expected to drop$372 million below what was in the budgetdue to the economic impacts of the coronavirus.

"We've lost about a billion dollars in revenue," Finance Minister Scott Fielding said."We're not going to apologize for providing a lot of supports for Manitobans."

Manitoba deficit expected to reach historic highs

4 years ago

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Manitoba's deficit is expected to reach historic highs by early spring due to the pandemic, though provincial outlooks suggest the deficit will be nearly $900 million less than projections earlier this fall.

The travel and restaurantindustries have been among the hardest hit, Fielding said. Construction, agriculture, science and technology fared better.

A range of tax revenues suffered a big blow.

The province lost about $40 million for each month casinos were closed in the first and second waves of the pandemic, Fielding said.

Wages and salaries, the largest chunk of personal tax income revenue,were down four per cent over the first nine months of the year.Personal income tax revenue will be $256 million lower than what was budgeted because of a decrease in household incomes during the pandemic, the report says.

Corporate income tax revenues slumped $141 million because of declining profits, and retail sales tax revenue is $44 million lower due to a decrease in collections during the pandemic.

Pausing Manitoba's planned $25-per-tonne carbon tax also cost the government an estimated $338 million it had worked into budget projections before the pandemic.

GDP to rebound

The province's net debt is forecast to reach $27.668 billion, increasing $1.232 billion from what was budgeted, the report says. That's expected to result in a debttogross domestic product ratio of 38.7 per cent.

Real GDPis also expectedtodecline an average of 4.6 per cent this year comparedtoa1.3 per cent increase projected in the budget.Butits2021 rebound is projected to hit 4.1 per cent, which Fielding attributed to estimates coming from external agencies.

This isn't the first time this year the province has made a gloomy projection only to later announce its books, while still expected to be awash in red, may not end up inquite as bad shape as anticipated.

In the early days of the pandemic, the premier said Manitoba's deficit could hit $5 billion. A credit rating agency pegged it at $3.5 billion in May.

During the first wave Pallister also said the provincial rainy day fund was likely to run dry.As of Thursday, there is about $840 million in the fund, he said. Itbenefited the government to borrow rather than burn through the fund early on because it enabled the finance ministry tonegotiate lower borrowing rates, the premier said.

Fort Garry MLA Mark Wasyliw, finance critic for the NDP, said Manitobans should be upset about how much rainy day fund money has gone unspent. He said provincial health orders have forced businessesto make sacrifices and they haven't been adequately supported.

"Where is their government when they need them?" he said. "They're sitting likeScrooge McDuck on a bankaccount with a huge pile of money in it and they're refusing to spend it because of one man's ego and political legacy."

'Not out of the woods'

The premier said the New Democratsdrained the rainy day fund during "sunny days" before the NDP was voted out of government, and his administration built it back up to where it is today.

Pallister also said making reliableCOVID-19 projections has proven difficult around the world.

The first vaccines were injected intoManitobansthis week, and the federal government says every Canadian who wants to be immunized could be by next September.Until then, the economic andhuman costs will continue, Pallister said.

"This year has been like no other.It's not one any of us would hope to repeat," he said. "We are not out of the woods yet."