Manitoba economy headed for trouble, report says – Winnipeg Free Press
Manitoba’s long-term fiscal situation is not looking good.
The Parliamentary Budget Officer says Manitoba’s current fiscal policy — which has the highest debt-to-GDP ratio in Canada — is unsustainable.
The nonpartisan office estimates that Manitoba’s 40.6% debt-to-GDP ratio reported in 2021 could rise to 79% in 2046, 157% in 2071 and 270% in 2096.
Debt-to-GDP ratios above 77% can hamper economic growth and potentially put a government at risk of defaulting on its debts, economists suggest.
The 42-page “Fiscal Sustainability Report 2022” examines current fiscal policy to see if changes are needed to avoid an unsustainable buildup of public debt and to estimate the magnitude of any changes.
2022 Fiscal Sustainability Report
He reviewed the spring 2022 federal and provincial budgets and found that the long-term fiscal policies of the federal government and several provincial governments are sustainable, such as that of Alberta, which is benefiting from higher oil prices. This is not the case for Manitoba, Ontario, Prince Edward Island and British Columbia, “to a modest extent,” he said.
“We estimate that permanent tax increases or spending cuts amounting to 0.1% of GDP would be required to stabilize the consolidated net debt-to-GDP ratio of governments (provincial and territorial) at 25.4% of GDP at the end of our projection horizon. in 2096.
All provinces face an aging population and a growing proportion of people leaving the labor market and retiring, leading to slower economic growth, the report said.
Slower economic growth will put downward pressure on government revenues as growth in the tax base slows. At the same time, the aging population will put upward pressure on government programs such as health care, old age security and retirement benefits, he said.
Overall, the provinces’ combined own-source revenues, together with federal transfers, are sufficient to keep the net debt-to-GDP ratio below its 2021 level over most of the 75-year projection horizon, a- he declared.
Manitoba’s long-term debt projections alone are currently in the same range as Venezuela and Japan, which are struggling with debt.
“This report is a warning.” – NDP Finance Critic Mark Wasyliw
Japan has the highest debt-to-GDP ratio in the world (236%), followed by Venezuela (232%), according to world population review. The United States ranked 13th (108%). It has the highest GDP in the world but still spends more than it earns. Canada ranks 28th (87%).
A spokesperson for the Manitoba government stressed Friday that the Parliamentary Budget Officer’s report was not a forecast and that several factors weighed in favor of Manitoba; including faster population growth and higher labor productivity growth relative to other provinces, on average.
“It also means that Manitoba’s GDP is expected to grow faster than the national average, which will lead to reduced federal transfers as a share of Manitoba’s economy over the long term, including transfers for health care.
The Parliamentary Budget Officer’s report shows that the federal government has the fiscal capacity to increase its share of health care spending — “something that Premier Heather Stefanson and other provincial leaders have repeatedly raised with the liberal government.
Since coming to power in Manitoba in 2016, promising to reduce a bloated deficit, and until the pandemic, the Progressive Conservative government has slowed the growth of the provincial debt. The debt-to-GDP ratio fell 3.6 percent a year from 10.9 percent in the years before PCs took office, according to the 2022 provincial budget.
The latest assessment of Manitoba’s long-term debt projections, however, is a “warning” and signs that “the chickens are coming home to roost,” say critics from both ends of the political spectrum.
“Chickens come home to roost.” – Prof. Gregory Mason
“This report is a warning,” said NDP Finance Critic Mark Wasyliw. He accused PCs of being “completely reckless” with Manitoba’s finances. The Conservatives have increased the province’s debt by issuing education property tax refund checks to out-of-province billionaires and Toronto-based corporations, Wasyliw said.
“It does not help our economy. It does not create jobs here. It doesn’t grow anything. And we get no tax revenue (generated) from this tax cut when taxpayers’ money goes elsewhere,” the Fort Garry MP said.
University of Manitoba economics professor Gregory Mason also objected to the province going into more debt to send property tax refunds to education, calling it “reckless.”
Manitoba’s long-term debt projections, Mason said, come as no surprise.
“Chickens come home to roost,” said the professor, who has a conservative fiscal leaning. The metric he is watching most closely is GDP, and whether it can support tax revenue.
If not, “the choices are simple,” Mason said: “float more debt, which will cost us more than during the pandemic, cut spending, (he raised the possibility of canceling participation in the national childcare program) or raise taxes.”
“Our economy has slowed down under the Conservatives and they have no plan to create jobs in Manitoba. –Mark Wasyliw
Although a low debt-to-GDP ratio is considered preferable, it does not guarantee a healthy economy. Many stagnant or developing economies have low debt-to-income ratios because their debt levels and GDP are low. Afghanistan, for example, had a debt-to-GDP ratio of 7.8% in 2020.
The NDP says investing in education and health care is the solution.
“Our economy has slowed down under the Conservatives and they have no plan to create jobs in Manitoba,” Wasyliw said. Provincially-mandated university tuition hikes, in addition to a five-week strike last year by faculty at Manitoba’s largest university, are hurting Manitoba’s economy, he said. he declares.
“We are now seeing international students bypassing Manitoba. They came here in droves. It was a huge driver of the economy, a huge area that we developed, but we’re also seeing faculty leaving Manitoba now with peak grants,” Wasyliw said. “We no longer do research in Manitoba, we no longer develop new technologies. All of that creates jobs, all that creates wealth, all that creates taxes, which means our debt problem is less because our economy is growing,” Wasyliw said.
“We think if we put in the effort now we can turn the tide and make sure that’s not a problem in the future.”
After 20 years of reporting on the growing diversity of people who call Manitoba home, Carol joined the office of the Legislative Assembly in early 2020.
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