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Manitoba Finance: July 2017
Economic and Fiscal Update
Province of Manitoba
1
Manitoba’s Economy
One of ten Canadian provinces (fifth-largest in population)
Centrally located in North America with a comprehensive transportation and communication network
Total Area 650,000 km2 (almost three times the area of the U.K.)
Population: 1.32 million, the second-fastest growing province in 2015 and 2016
Capital: Winnipeg, Pop. 811,900
Extensive natural resources (minerals, forests, fertile soil, freshwater lakes)
Sound credit rating: Moody’s: Aa2 (stable) and S&P: AA- (Neg)
2
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Broad and Balanced Industrial Base
The Manitoba economy has a relatively well-balanced industrial base with a majority of medium-sized industries each contributing over 5% to total value-added output
The range in contribution from the smallest to the largest industry is the narrowest among provinces: many similar sized sectors
Manitoba is the most stable economy among provinces with steadiest growth in:
Real GDP
Employment
Labour income
International merchandise exports
Manufacturing sales
3
Diversified Industries
Sources: Statistics Canada and Manitoba Finance
Note: Excludes imputed rent
Agriculture, Forestry and Fishing, 3.7%
Mining, Oil and Gas, 5.0%
Utilities, 3.0%
Construction, 8.4%
Manufacturing, 9.8%
Wholesale, 5.8%
Retail, 5.8%
Transportation, 6.4% Finance and Insurance,
5.9%
Real Estate, 3.6%
Information, Culture, Administration and
Management of Companies, 5.0%
Professional and Scientific, 3.1%
Accommodation, Food, Arts and Entertainment and Other Services, 4.3%
Public Administration, 7.7%
Health and Social Services, 8.0%
Education Services, 5.4%
GDP By Industry Shares, 2016
Commercial Services
Goods-Producing
Non-Commercial Services
4
31.6
24.0
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
2000 2003 2006 2009 2012 2015
Manitoba
Canada
Share of Exports to Non-U.S. Markets, 2000 – 2016 (Per Cent)
Broad and Balanced Export Market
Source: Statistics Canada 5
Expanding into Non-Traditional Markets
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
1981 1986 1991 1996 2001 2006 2011
Interprovincial
International
Balancing Domestic and International Sales
Manitoba’s Share of Interprovincial and International Exports, 1981 – 2015 (Per Cent)
Grains, Oilseeds and Livestock
Aerospace Components and Service
Transit and Inter-City Buses
Processed Food Products
Machinery and Equipment
Mining and Oil Extraction
Electricity (Mostly Hydro)
Industrial Chemicals
Pharmaceuticals
Manitoba’s Broad Export Base
6
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50-Year Historical Average
0.6%
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2000 2005 2010 2015
Annual Population Growth, 2000 – 2016 (Per Cent)
Expanding Population
Source: Statistics Canada 7
Manitoba Exceeded Canada’s Population Growth in each of the Last Six Years
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
2000 2005 2010 2015
Recruiting International Skilled Workers
International Immigration, 2000 – 2016 (Persons)
Low Unemployment Rate
Source: Statistics Canada 8
5.4 5.7 6.2 6.2 6.4
6.7
8.2 8.4 8.7
10.1
14.2
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
BC MB SK ON QC CAN NS AB NB PE NF
Among the Lowest Unemployment Rates and Among the Highest Labour Force Participation Rates in Canada
Unemployment Rate, 2016 (Per Cent)
Moderating Sales
Source: Statistics Canada 9
-8.0
-6.0
-4.0
-2.0
0.0
2.0
4.0
6.0
8.0
2009 2010 2011 2012 2013 2014 2015 2016 2017 YTD
Gradual Improvements in Manufacturing Sales
Manufacturing Sales, 2009 – 2017 Year-to-Date (Annual Growth in Per Cent)
-
10,000
20,000
30,000
40,000
50,000
60,000
MB QC PE NB SK NS NF CAN AB ON BC
Household Debt Per Capita, 2016 (In Dollars)
Firm Household Finances
10
Lowest Household Debt per Capita Among Provinces
0.14
0.25 0.28 0.31
0.36 0.40
0.60 0.63
1.60
-
0.20
0.40
0.60
0.80
1.00
1.20
1.40
1.60
1.80
ON BC CAN MB QC AB SK AC* U.S.
Stable Mortgage Financing
Mortgage Arrears: Delinquency Rate (90+ days) 2016 (Per Cent)
* – Atlantic Canada Sources: Bank of Canada, Canadian Bankers Association and Federal Reserve of New York
2.7 2.8
1.4
1.8
1.4
2.0 2.0
1.7
2.5 2.6
0.9
1.4
2.3
2.0
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2012 2013 2014 2015 2016 2017F 2018F
Manitoba
Canada
Trend Line
Real GDP Growth, 2012 – 2018F (Per Cent)
Economic Performance
Sources: Statistics Canada, Manitoba Bureau of Statistics and Manitoba Finance Survey of Economic Forecasts 11
Growth Moderated in Canada and Manitoba Due to Low Commodity Prices, but Expected
to Improve in the Near Term
f – Forecast based on Manitoba Finance Survey of Economic Forecasts Source: Manitoba Finance Survey of Economic Forecasts
Economic Outlook, 2017f-2018f
Manitoba Finance Survey of Economic Forecasts
12
2017f 2018f
Manitoba Canada Manitoba Canada
Percent Growth Unless Noted
Real GDP 2.0 2.3 2.0 2.0
Nominal GDP 3.9 4.6 3.9 3.9
Employment 0.8 1.3 0.8 0.9
Unemployment Rate (%) 6.0 6.7 5.9 6.6
Consumer Prices 1.9 2.1 2.1 2.0
Restoring Fiscal Discipline
Budget 2017: Responsible Recovery
Restoring credit ratings, meeting budget targets, stabilizing net debt
to GDP and sustainable investment in strategic infrastructure
Foundation for Strong Fiscal Fundamentals
Fiscal Performance Review of core government departments
Review of all tax credits
New legislation:
The Fiscal Responsibility and Taxpayer Protection Act
The Public Service Sustainability Act
The Health Sector Bargaining Unit Review Act
The Red Tape Reduction and Government Efficiency Act
13
Responsible Recovery
f – forecast, b – budget and p – projection Source: Manitoba Finance
(185) (181)
(1,001)
(560) (522)
(430)
(846) (872) (840)
(698)
(549)
-1,200
-1,000
-800
-600
-400
-200
0
200
Annual Surplus (Deficit) 2009-10 to 2019-2020p (Millions of Dollars)
14
New Administration
0.0
10.0
20.0
30.0
40.0
50.0
60.0
AB SK BC PE CAN MB NS ON NB QC NL
Net Debt to GDP Ratio, 2017 - 2018B (Per Cent)
Comparable Among Peers
Source: Manitoba Finance 15
Average Among Provincial Peers
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
AB SK BC MB PE NS NB CAN ON QC NL
Below Average Among Provincial Peers
Interest on Debt to Revenue, 2017 - 2018B (Cent/Revenue)
Budget 2017
Source: Manitoba Finance
Health 39.2%
Education 25.8%
Families 12.6%
Community, Economic and
Resource Development
9.0%
Justice and Other 7.6%
Debt Servicing 5.8%
Revenues Expenses
Income Taxes 26.0%
All Other Taxes 28.0%
Fees and Other Revenue
14.3% Net Income of Government
Business Enterprise
4.4%
Federal Transfers
25.8%
Sinking Funds and Other Earnings
1.5%
16
97.5% of electricity generation is hydro,
2.3% is wind and 0.2% is thermal.
Roughly 1/4 of the electricity
generated is exported outside of
Manitoba (U.S., Canada).
Manitoba Hydro’s current generation
capacity is 5,680 MW, with an
additional 4,400 MW more of potential
generation identified. M
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Tex
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Dak
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So
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Dak
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Min
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Wis
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0
2
4
6
8
10
12
14
16
18
20
Retail Price of Electricity (Cents/kWh $C)
Source: Manitoba Hydro, 2015/2016 Annual Report
North America’s Clean Energy Leader
17
18
Manitoba Hydro Capital Initiatives
Keeyask Hydro Generating Station Project
Design Capacity:
695 MW
Anticipated Completion: 2021/22
Anticipated Cost: $8.7B
Manitoba Hydro is currently investing in both a major generation project and
transmission project.
Source: Manitoba Hydro
Bipole III Transmission Line Project
Design Capacity:
1,364 km
Anticipated Completion: 2018/19
Anticipated Cost: $5.0B
18
Manitoba’s credit rating remains strong given elevated global economic uncertainty.
Manitoba’s credit rating is generally the highest among non-resource rich provincial
economies.
Manitoba – Credit Ratings Profile
Sources: Moody’s Investor Services and Standard and Poor’s Rating Services 19
Aa3 [Neg]
Aa2
Aa2
Aa2
Aa2
Aa2
Aa2
Aa1 [Neg]
Aaa
Aaa
NL
PE
NB
NS
ON
QC
MB
AB
SK
BC
Moody’s Credit Ratings
A
A
A +
A +
A +
A +
A +
AA -
AA
AAA
NL
PE
NB
NS
ON
AB
MB
QC
SK
BC
S&P Credit Ratings
Budget 2017 was tabled on April 11, 2017.
Expected borrowing requirements for fiscal year 2017/18 are C$6.7 billion.
Planned funding through both domestic and international capital markets.
To date, we have funded $4.14 billion, 62% of our needs for fiscal 2017/2018.
$779M General Programs
$468M Other Crowns & Org.
$418M Capital Investments
New Cash Requirements
$4.6 billion Refunding Maturing Debt
$2.1 billion
Borrowing Requirements
C$6.7 billion
$2,967M Manitoba Hydro
Source: Manitoba Finance 20
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
2011/2012 2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018b
(C$ Billion) Future Expectations International Domestic
Borrowing Program
b – budget Source: Manitoba Finance 21
Funding Sources (Apr 1, 2012 - July 27, 2017)
MTN 11% CAD Public
Debentures 46%
AUD MTN 4% U.S. Global
21% FRN 7%
EMTN 10%
Savings Bonds 1%
(discontinued in 2016)
GBP, JPY, HKD & EURO
Source: Manitoba Finance 22
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
10.0
11.0
12.0
2018 2019 2020 2021 2022 2023-2027
2028-2032
2033-2037
2038-2042
2043-2064
(C$ Billion)
As of July 27, 2017. Excludes short-term debt and other liabilities, and the incremental impact of future financing. Net of sinking fund maturities.
Debt Maturity Profile
Manitoba conducts prudent debt management practices
and has achieved a stable level of debt maturity profile over
the intermediate term.
23
f – forecast. All figures for Core Government debt Source: Manitoba Finance
Floating 10%
Fixed 90%
March 31, 2016 March 31, 2017f
Debt Portfolio – Fixed/Floating Ratio
Floating 8%
Fixed 92%
24
Thank you! Regularly updated Economic and
Financial Reports are available on the internet at:
www.gov.mb.ca/finance
25