Manitoba's Finance Minister says the 2020-21 year-end financial results show ongoing challenges and uncertainties associated with the COVID-19 pandemic and its continuing impact on Manitoba's economy, but Scott Fielding says there is room for optimism.
"We see indications of economic growth and a low unemployment rate but far too many people are still unemployed," said Fielding. "Both the Public Accounts and the First Quarter report are within the budgeted targets. When considering the COVID-19 costs that are included in both years, government continues to show its ability to manage the finances in turbulent times."
In a news release, the minister said "COVID-19 left a significant mark on Manitoba's finances, increasing expenditures by nearly $2 billion in 2020-21, resulting in the province's summary financial position as of March 31, 2021, in a deficit of $2.117 billion. Provincial own-source revenues were $566 million less than the prior year due to a significant decrease in income taxes. Lower net income of government business enterprises, including Manitoba Liquor and Lotteries, were also impacted by the pandemic. Despite these challenges, Manitoba continued to invest in the priority areas of health care, education and families. In 2020-21, government invested $1.7 billion more in these areas than in 2015-16 as it has done each year.
Breaking it down further, the province says Corporate income taxes came up $97 million short, and income tax revenues were under budget by $325 million. Other taxes, such as payroll and PST, were short by $281 million - and income from government businesses such as liquor, casinos and cannabis was down by $147 million.
"We are focused on Manitoba's recovery, and budget 2021 set aside nearly $1.2 billion for the ongoing COVID-19 response and to prepare the province for future economic shocks and challenges," said Fielding. "Although our focus is to continue to protect Manitobans through the ongoing pandemic, we have made a commitment to once again return to balance within the next eight years."
The Manitoba government has worked to ensure the economy is resilient and the finances can weather storms like COVID-19, the minister said. The provincial unemployment rate demonstrates that resilience now at 5.7 per cent, ranking the best in the country. The female unemployment rate is third lowest in Canada at 5.7 per cent and the youth unemployment rate is second lowest at 7.6 per cent. The provincial labour market has nearly returned to pre-pandemic levels after employment plummeted by 90,300 net jobs in April 2020 following the implementation of pandemic health restrictions. Between April 2020 and August 2021, Manitoba's labour market regained 79,500 net jobs.
"While declining COVID-19 cases and achieving vaccination targets earlier than expected will help to accelerate economic activity in Manitoba, the pace and magnitude of recovery in 2021 and 2022 will depend on a variety of factors," said Fielding. "The biggest risk to the provincial economy remains the impact of COVID-19, notably the variants of concern."
A resurgence of the virus in other parts of the world, particularly the United States, could also affect Manitoba's economic recovery. Businesses are continuing to experience supply chain bottlenecks brought on by the pandemic. Further disruptions to business operations could result in further supply shortages and higher prices for consumers affecting economic performance, the minister noted.
After a strong start to the year, agriculture producers in Manitoba faced a drought this summer that reduced crop yields, as well as the supply of feed for livestock. The impact of the drought on Manitoba Hydro's net income is expected to be known with greater certainty after October, while current expectations remain below budget, Fielding said. Budget 2021 included a $100-million contingency provision, increased from $25 million in prior years, as a prudent fiscal planning measure given the uncertain economic and public health situation. This contingency offsets by half the lower net income of government business enterprises.
Manitoba's net debt to GDP increased by 4.8 per cent in 2020-21 due to a rise in borrowing related to the COVID-19 pandemic. Overall Manitoba's GDP was impacted by the pandemic in 2020, declining by 4.8 per cent, which was the fifth lowest decrease among the provinces, behind only B.C. and the Maritime provinces. However, Manitoba has seen a strong rebound in 2021 with projected GDP growth of 4.9 per cent this year and 3.7 per cent in 2022. This should return Manitoba's economy and employment levels to a path of growth similar if not higher than pre-pandemic levels."
You can view the 2020-21 public accounts and 2021-22 first quarter report at: www.manitoba.ca/governmentfinances