TORONTO (Reuters) – Ontario, Canada’s most populous province and economic engine, projected on Wednesday its budget deficit would widen to a record C$38.5 billion ($29.09 billion) in 2020-2021 as it raised support for the economy ravaged by the coronavirus crisis.
The province boosted projected COVID-19 support measures to C$30 billion from C$17 billion in March, when its estimate for the deficit was C$20.5 billion.
It includes C$4 billion in partnership with the federal government to help municipalities and transit agencies, as well as a one-time top up of C$4.3 billion for a health contingency fund and C$3 billion in direct support for people and jobs.
“The size of the deficit was not unexpected given all of the events of the past few months as well as the additional measures that will be implemented through the remainder of the year,” said Brian Calder, a portfolio manager at Franklin Templeton Canada.
The yield on its 10-year bond was up about 2 basis points to 1.32%, in line with the move in Government of Canada bonds.
Program expenses are projected to be C$174.2 billion in 2020-2021, which is C$13.1 billion higher than estimated in March, while revenues are seen C$5.7 billion lower at C$150.6 billion as the economy contracts.
Ontario projects GDP will shrink by 6.7% in 2020 before rebounding by 5.5% in 2021. Much of its economy has reopened in recent months as the number of coronavirus cases declined.
Net debt-to-GDP ratio is expected to rise to 47.1% in 2020-2021 from 41.7% seen in March.
The province, one of the world’s biggest sub-sovereign borrowers, has completed C$23.6 billion of an estimated C$52.1 billion in long-term borrowing for the current fiscal year.
“Ontario will have a lot of wood to chop once they become active again (in issuance) as we approach the fall months,” Calder said.
The province is maintaining a higher than normal reserve of C$2.5 billion to give it greater fiscal flexibility.
(Reporting by Fergal Smith; Editing by Bernadette Baum)