Thursday, November 19, 2015

Is Ontario Going To Have GDP Growth Over 2.0% In 2015? Surly Says No

Surly Hamilton follows the Ontario GDP reports from the finance ministry quite carefully. We were quite skeptical when the current budget document predicted GDP growth of 2.7% for Ontario in 2015. For the first two quarters of 2015, Ontario posted 0% growth in the first quarter and 1.4% in the second quarter (annualized).

So that's roughly 0.7% for the first half, which would require growth in the second half of 4.7% in order to reach the 2.7% prediction. In November, that seems very unlikely.

Now Ontario's financial accountability officer (sort of like the federal PBO) is predicting that the Ontario Liberal promise of balancing the provincial budget in 2017-2018 is unlikely. Part of this reason is that the officer is predicting growth of 2.0% for 2015. Which strikes me as also optimistic as it would require growth of 3.3% in the second half to reach. Given the weakness in Ontario employment growth lately and in the US economy, Ontario's principal export market, good GDP growth in Ontario seems extremely unlikely. The 2015 budget document also predicts GDP growth of 2.2% in 2016, which while more plausible, also seems unlikely to be reached.

Ontario has population growth of around 0.9% per year, so any economic growth beyond this requires productivity growth that Ontario has been unable to generate as it shifts to a service based economy from a manufacturing based economy. 

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