Saskatchewan Finance Minister Donna Harpauer delivers the first-quarter budget update on Aug. 27, 2020. (Lisa Schick/980 CJME)

By CKOM News

Mid-year financial report forecasts lower deficit

Nov 27, 2020 | 10:56 AM

Saskatchewan’s financial picture is brighter than expected at the mid-year point.

The 2020-21 mid-year report, which was released Friday, predicts the province’s deficit will be more than $380 million lower than was forecast in the budget.

“As reflected in these latest forecasts, our government is managing the province’s finances carefully through the pandemic,” Finance Minister Donna Harpauer said in a media release.

“The mid-year update also includes $260 million of contingencies to cushion against potential pandemic-related revenue and spending shocks over the remainder of the fiscal year.”

The report forecasts a deficit of $2.0 billion, an improvement of $381.5 million from the budget and $86 million from the first quarter.

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The province now is expecting revenue to be $14.2 billion, up $503.5 million from the budget and an increase of $105 million from the first quarter.

Higher federal transfers (nearly $443 million), higher Government Business Enterprise net income (including a $97.3-million increase from the Saskatchewan Liquor and Gaming Authority due to a better-than-expected recovery from COVID-19) and higher non-renewable resource revenue (in part because oil prices increased since the budget was delivered) played roles in the predicted increase in revenue.

However, there was a $41.2-million decrease in tax revenue as a result of the province’s decision to reduce the small business tax rate to help companies recover from the effects of COVID-19.

The province’s expenses now are expected to be $16.2 billion, an increase of $122.0 million from the budget and $19 million from the first quarter.

The increase includes higher spending in the health, education, municipal and tourism sectors due to the pandemic. That increase was partly offset by lower-than-expected pension and crop insurance claims expenses.

The government has kept in place a $160-million expense contingency.

The province’s public debt ($23.8 billion, down $541 million from the budget) and net debt are both lower than was forecast in the budget.

Saskatchewan’s net debt-to-GDP ratio as of March 31 is expected to be 19.6 per cent.

“Saskatchewan’s economy has performed better than originally anticipated in the June 2020 budget,” Harpauer said. “Real GDP is forecast to decline 5.0 per cent, compared to a decline of 6.3 per cent forecast at budget.

“Saskatchewan’s unemployment rate was the lowest in Canada in October and total employment, on an unadjusted basis, is nearing pre-pandemic levels. As a result, our planned path to balance in 2024-25 is unchanged.”

According to the government, the province’s real GDP is expected to increase by 3.4 per cent in 2021. However, Saskatchewan’s growth forecast for 2021 is down from the first-quarter projection because of lower expectations for oil production and investment in the province.