Amid the gloom cast by new COVID restrictions announced yesterday came a surprising shot of Christmas cheer: seems COVID hasn’t decimated the provincial economy after all.
In fact, Nova Scotia is on a roll — with provincial revenues up $1 billion more than forecast when the provincial budget came down nine months ago.
At that moment, with a third wave of COVID about to rear its ugly head, the McNeil government was forecasting a deficit of nearly $600 million for March 2022. Yesterday, Finance and Treasury Board officials said the province is now expecting a surplus of $108 million — a big swing of nearly $700 million — that left reporters scratching their heads to make sense of things.
The short answer is that despite a lockdown earlier this year, Nova Scotians kept working and kept spending money at a pace not foreseen by economists, whose revenue projections were off by $349 million. As the population grew and wages increased by about 6.4%, the province collected a whopping $1 billion more in revenue than forecast. This was largely fuelled by increases in personal and corporate income tax, as well as the HST that applied to record-setting sales of Nova Scotia real estate. And household income actually grew, supported by federal programs like the CERB.
Finance Minister Allan MacMaster credited public health policies with laying the foundation for economic recovery in 2021.
“Nova Scotia’s ability to avoid extended lockdowns has contributed significantly to the fact our economy has kept moving,” MacMaster told reporters on a teleconference yesterday. “People have continued to purchase and consume and people have been able to continue to work. You can see that reflected in the numbers for HST revenue and personal income tax.”
And new figures released for 2020 show that while the economy shrank by 2.5%, that was the second-best of any province and less than half what had been projected for Nova Scotia.
Of course what is happening right now with the rise of the Omicron variant could makes today’s economic forecasts as suspect as those from last March. COVID has taught us all how difficult it is to make plans, let alone forecasts.
MacMaster acknowledged that while major employers in tourism, recreation, and arts and culture continue to be disrupted and hard hit by the ongoing waves of the pandemic, Nova Scotia’s economy is growing again.
Nominal GDP, which factors in prices and inflation, is expected to increase by nearly 7% by next March. Data received just last month (later than usual because of the pandemic) from Statistics Canada and the Canada Revenue Agency showed the number of jobs, exports, and retail sales had all returned to pre-pandemic levels in November.
“In 2020, nobody knew where we were going,” said MacMaster. “What we have seen since is that certain sectors have been hard hit and others did better. The world has changed. Companies will need to adapt and the health care system will have to adjust to the new world.”
The ledger shows government departments also spent more money than budgeted — $379.1 million more. But even the Department of Health and Wellness, the largest spender that chews up 40% of every public dollar, is currently less than 2% over budget. That’s mostly due to decisions to defer until next year the cost of a new Emergency Department for the IWK Children’s Hospital (although construction has begun) and an upgrade to the South Shore Regional Hospital.
Unless Omicron upends all economic forecasts — and Finance officials are clear that’s where the biggest uncertainty lies — the province should finish the year $108 million to the good.
Visions of sugarplums
There’s no shortages of places where that surplus could be put to work. The Houston government has spent $40 million since September on initiatives to increase staffing at LTC homes and a total of $69 million since March when you include $32 million for grants to help more seniors stay in their own homes.
And $50 million was announced last week to help people make their homes and apartments more energy efficient and reduce carbon emissions.
Since the provincial budget last March, an additional $32 million has been allocated to begin tackling the affordable housing crisis. Another $32 million went to help municipalities with their finances.
But now with restaurants and bars hit hard in what would normally be one of their busiest and most lucrative times of the year, what help can government offer thousands of people out of work just before Christmas?
At yesterday’s Covid briefing , Premier Tim Houston offered a glimmer of hope. Houston confirmed he has been talking with opposition leaders about possibly opening the purse strings to guarantee workers a certain number of paid sick days. The majority of employees in this province don’t have the option of staying home if they are sick or have COVID symptoms because they can’t afford to lose any pay.
The sneaky, super-transmissible Omicron variant has brought this issue to the forefront. Again. For years, NDP leader Gary Burrill has been urging governments to implement this protection. Now it may be on the radar screen of this premier.
The Examiner asked Houston if the province’s improving financial health means some of this unexpected revenue will be directed toward workers who are unable to work because of the latest COVID restrictions.
“Yes, sure,” replied Houston.” We have supported businesses and we will look at supports for Nova Scotians and employees who can’t get to work otherwise…there’s some precedent in the past for some of those programs…Nobody, nobody wanted this wave. It’s proving to be debilitating with the potential to get worse.”
Finance officials had expected the third wave of COVID in the spring but made no provisions for the fourth wave the province is grappling with today. The uncertainty and volatility around COVID makes economic forecasting especially difficult, as proven by the surprising good news about a potential budget surplus. We’ll take it. And hope we won’t have to return it to the store after Christmas.