The Implications of an Aging Population for Government Finances in Ontario

Summary

• Seniors currently compose 17.6 percent of Ontario’s population, and their share of the province’s population will continue to grow and reach nearly 24 percent by 2043.
• This will drive increases in health care spending and slow the growth in revenues, which will impose adverse effects on the provincial economy. The risk of future recessions, rising interest rates, and other unexpected events will only compound problems further.
• Health care expenditures are estimated to increase by approximately 4.1 percent annually from now until 2040/41. Put differently, Ontario’s health care spending will increase from 7.1 percent of GDP in 2019 to 7.6 percent in 2040.
• The aging population will exacerbate challenges for Ontario government finances and projections suggest that at the current trajectory the province will not see a balanced budget before 2040.
• Ontario is expected to run primary deficits (excluding interest costs) equivalent to between 0.3 and 0.4 percent of GDP, unless it makes changes to its spending or tax policies.