Auto sector vulnerability. The industry accounts for about one-third of Ontario merchandise exports in a typical year and Ontario makes up nearly all of Canadian production. Disproportionately hindered by the global shortage of semiconductors, output guidance was reduced throughout 2021, which weighed significantly on Ontario trade volumes. In line with current projections, we expect a bounce-back this year, but production is on track to remain below pre-shortage levels for the next year (chart 1).
Population flows shifting. Immigration significantly ramped up last year, in large part due to policy that provides a path to permanent residency for prior temporary workers; newcomer admissions should remain high in 2022–23. As well, Ontario residents have flocked to other provinces during the pandemic. We expect that these outflows will ease in 2022, but housing affordability challenges and remote work should continue to push some workers to settle outside Ontario. The pandemic appears to have accelerated movement out of Toronto, a trend already in place before COVID-19.
Fiscal picture improved, but growth implications marginal. A faster-than-anticipated economic recovery contributed to a much stronger FY22 starting point for Ontario budget balances. Program spending growth rate forecasts were increased versus the prior plan, though some of the boost represents re-profiled outlays originally planned for FY21, and infrastructure plans were only slightly raised. Beyond this year, program expenditures are set for modest increases.
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