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Manitoba Finance: April 2018
Province of Manitoba
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Economic, Fiscal and Borrowing
Update
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
Population: 1.34 million, the fastest growing province in the last three years
Capital: Winnipeg, Pop. 849,500
Extensive natural resources (minerals, forests, fertile soil, freshwater lakes)
Sound credit rating: Moody’s: Aa2 (stable) and S&P: A+ (stable)
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Manitoba Economy: Consistent Growth
Diversified economy, with a majority of medium-sized industries.
Economic activity and jobs are not focused on one particular sector or area, as a result, long-term progress is balanced by growth across different sectors.
Manitoba’s 10-year average annual real GDP growth has been relatively stable over the last 15 years, while the national average has declined.
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2.4 2.2
3.5
1.6
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
2002 2004 2006 2008 2010 2012 2014 2016
Manitoba Canada
10-Year Average Annual Growth in Real GDP: Manitoba and Canada, 2002 - 2016 (Compounded Average Annual Per Cent)
Source: Statistics Canada
Diversified Industries
Sources: Statistics Canada and Manitoba Finance
Note: Excludes imputed rent
Agriculture, Forestry and Fishing 3.6%
Mining, Oil and Gas 5.0%
Utilities 3.1%
Construction 7.7%
Manufacturing 9.7%
Wholesale 6.2%
Retail 5.7%
Transportation and Warehousing 6.5%
Finance and Insurance 5.9%
Real Estate, Rental and Leasing 3.7%
Information, Culture, Administration and
Management of Companies 4.9%
Professional and Scientific 3.1%
Accommodation, Food, Arts and Entertainment and Other Services 4.6%
Public Administration 7.7%
Health and Social Services 8.0%
Education Services 5.5%
GDP By Industry Shares, 2016
Commercial Services
Goods-Producing
Non-Commercial Services
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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
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Relatively Lower U.S. Exposure
United States 64.7%
China 10.1%
Japan 5.9%
European Union 4.3%
Other 15.0%
Manitoba International Exports, 2017
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United States 75.2%
China 4.5%
United Kingdom
3.4%
European Union
7.7% Other 9.2%
Canada International Exports, 2017
Source: Statistics Canada
Manitoba: 35% Non-U.S Exports Canada: 25% Non-U.S Exports
Growing Population – Resilient Labour Market
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Historical Average
0.8%
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2000 2004 2008 2012 2016
Annual Population Growth, 2000 – 2017 (Per Cent)
Fastest population growth among provinces over the past three years, while maintaining the second lowest unemployment rate.
Source: Statistics Canada
5.1 5.4 6.0 6.1 6.3 6.3
7.8 8.1 8.4
9.8
14.8
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
BC MB ON QC SK CAN AB NB NS PE NL
Unemployment Rate, 2017 (Per Cent)
0
100
200
300
400
500
600
700
800
2006 2008 2010 2012 2014 2016 2018i
Adding Value and Jobs at Home
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Acceleration of capital spending on value-added processing within Canada
Capital Investment In Manufacturing, 2006-2018i (In Millions of Dollars) Increasing farm diversification and
employment, especially in rural areas.
Broadening Manitoba’s export base and
improving agriculture competitiveness
and profitability.
• HyLife is expanding its Integrated
Pork Production and Processing
System. Adding more processing
capacity and up to four finisher sites.
• Roquette is building the world’s
largest pea-protein processing facility
in Manitoba.
• Simplot plans to more than double its
food processing capacity for frozen
french fries and formed potatoes.
i – Capital spending intention for 2018 Source: Statistics Canada
Real GDP Growth, 2013 – 2019f (Per Cent)
Economic Growth Rate
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2.5
2.9
1.0
1.4
3.0
2.3
1.8
2.8
2.0
1.3
1.7
2.2 2.0
1.6
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2013 2014 2015 2016 2017 2018f 2019f
Canada
Manitoba
Following a recovery from a commodity price shock, growth expected to moderate in the near-term
Forecast
f – Forecast based on Manitoba Finance Survey of Economic Forecasts Sources: Statistics Canada, Manitoba Bureau of Statistics and Manitoba Finance Survey of Economic Forecasts
f – Forecast based on Manitoba Finance Survey of Economic Forecasts Source: Manitoba Finance Survey of Economic Forecasts
Economic Outlook, 2018f-2019f
Manitoba Finance Survey of Economic Forecasts (As at April 2018)
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2018f 2019f
Manitoba Canada Manitoba Canada
Percent Growth Unless Noted
Real GDP 2.0 2.3 1.6 1.8
Nominal GDP 3.8 4.1 3.5 3.8
Employment 0.8 1.4 0.5 0.9
Unemployment Rate (%) 5.3 5.9 5.3 5.8
Consumer Prices 2.1 2.0 2.1 2.0
Province of Manitoba: Fiscal Update
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Building Budgets that Focus on Outcomes
Bending the Cost Curve
Streamlining collective bargaining agreement and establishing sustainable
salary expectations.
Reducing core government management by 15%.
Return on investment test for capital spending.
Transformation Management Office to oversee health care spending.
Spending below budget levels for the past two years – the first time this has
been done in almost 15 years.
Manitoba’s Competitive Tax Disadvantage
Bringing Manitoba’s tax regime in line with other provinces.
Supporting the Economy
Commitment to annually spend at least $1 billion on strategic infrastructure.
The level of investment in 2018/19 is over $1.6 billion, exceeding the
commitment.
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Budget 2018
Source: Manitoba Finance
Health 38.7%
Education 25.6%
Families 12.3%
Community, Economic and
Resource Development
8.3%
Justice and Other 9.2%
Debt Servicing 5.9%
Revenues Expenses
Income Taxes 24.1%
All Other Taxes 28.6% Fees and Other
Revenue 13.9%
Net Income of Government
Business Enterprise
5.0%
Federal Transfers
26.8%
Sinking Funds and Other Earnings
1.6%
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Gaining Credibility
f – forecast Source: Manitoba Finance 14
Budget (438)
Budget (460)
Budget (518)
Budget (357)
Budget (422)
Actual (764)
Forecast (726)
Actual (1,001)
Actual (560)
Actual (522)
Actual (430)
Actual (839)
Budget (911)
Budget (840)
-1,200
-1,000
-800
-600
-400
-200
0
200 (Previously missing budget commitments
Budget vs. Actual/Forecast Annual Surplus (Deficit), 2011-12 to 2017-18f (In Millions of Dollars)
New administration
Responsible Path Forward
f – forecast, b – budget and p – projection Source: Manitoba Finance
Actual (764)
Forecast (726)
Budget (521)
Projection (388)
Projection (280)
Projection (142)
-1,000
-800
-600
-400
-200
0
200
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Budget 2018 provides an improved trajectory from
Budget 2017
Annual Surplus (Deficit), 2016-17 to 2021-22p (In Millions of Dollars)
New administration
0.0
5.0
10.0
15.0
20.0
25.0
30.0
35.0
40.0
45.0
50.0
AB BC SK PE MB CAN NS ON NB QC NL
Net Debt to GDP Ratio, 2017 – 2018f (Per Cent)
Comparable Among Peers
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Average among provincial peers
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
AB SK BC MB PE NB CAN NS ON QC NL
Below average among provincial peers
Interest on Debt to Revenue, 2017 – 2018f (Cents/Revenue)
f – forecast Sources: Provincial and federal budgetary documents and Manitoba Finance calculations
Competitive Business Environment
Manitoba’s small business tax rate is currently at 0% on income up to $450,000, increasing to $500,000 in 2019.
Manitoba’s general corporate income tax rate of 12% remains below the Canadian provincial average.
The combined Manitoba and federal general corporate income tax rate of 27% is comparable to the median of our ten largest U.S. state trading partners.
Manitoba has a number of targeted corporate and community development tax credits to support economic growth in the province.
• Manufacturing Investment Tax Credit for plant and equipment investment for first-time use in manufacturing or processing.
• Manitoba Research & Development Tax Credit for scientific research and experimental development.
• Manitoba Film and Video Production Tax Credit for eligible production expenditures including eligible labour expenses.
• Co-operative Development Tax Credit for cooperatives and credit unions that make financial contributions towards cooperative development.
• Community Enterprise Development Tax Credit assists community-based enterprise development projects to raise local equity capital.
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“The government’s commitment to deficit reduction now appears increasingly credible with
two years of budget outperformance and an ongoing focus on spending discipline.”
Commentary – March 13, 2018, DBRS
“At the same time, the province extended its fiscal outlook to four years (from three), a change
that provides improved visibility into its fiscal planning.” Issuer Comment – March 13, 2018, Moody’s Investor Services
Manitoba – Credit Ratings Profile
Sources: Moody’s Investor Services and Standard and Poor’s Rating Services 18
Aa3
Aa2
Aa2
Aa2
Aa2
Aa2
Aa2
Aa1
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
ON
AB
MB
NS
QC
SK
BC
S&P Credit Ratings
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.
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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, 2016/2017 Annual Report
North America’s Clean Energy Leader
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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
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Budget 2018 was tabled on March 12, 2018.
Expected borrowing requirements for fiscal year 2018-19 are C$6.4 billion.
Planned funding through both domestic and international capital markets.
To date, we have funded $0.6 billion, 21% of our needs for fiscal 2018-2019.
$635M General Programs
$527M Other Crowns & Org.
$371M Capital Investments
New Cash Requirements
$4.1 billion Refunding Maturing Debt
$2.3 billion
Borrowing Requirements
C$6.4 billion
$2,600M Manitoba Hydro
Source: Manitoba Finance 21
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
2012/2013 2013/2014 2014/2015 2015/2016 2016/2017 2017/2018f 2018/2019f
(C$ Billion) Future Expectations International Domestic
Borrowing Program
b – budget Source: Manitoba Finance 22
Funding Sources (Apr 1, 2012 – Apr 27, 2018)
MTN 11% CAD Public
Debentures 49%
AUD MTN 5%
U.S. Global 18%
FRN 6%
EMTN 10%
Savings Bonds 1%
(discontinued in 2016)
GBP, JPY, HKD & EURO
Source: Manitoba Finance 23
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2018
2020
2022
2024
2026
2028
2030
2032
2034
2036
2038
204
0
204
2
204
4
204
6
204
8
2050
2052
2054
2056
2058
206
0
206
2
206
4
206
6
206
8
(C$ Billion) Manitoba conducts prudent debt management practices and
has achieved a stable level of debt maturity profile over the
intermediate term.
As of April 27, 2018. Excludes short-term debt and other liabilities, and the incremental impact of future financing. Net of sinking fund maturities.
Debt Maturity Profile
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f – forecast. All figures for Core Government debt Source: Manitoba Finance
Fixed 90%
Floating 10%
March 31, 2017 March 31, 2018f
Debt Portfolio – Fixed/Floating Ratio
Floating 10%
Fixed 90%
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Latest Economic and Financial Reports are available online:
Manitoba Finance: http://www.gov.mb.ca/finance/
Economic Highlights: http://www.gov.mb.ca/finance/pubs/highlights.pdf
Economic Statistics: http://www.gov.mb.ca/finance/pubs/statistics.pdf
Manitoba Provincial Budget: https://www.gov.mb.ca/budget2017/index.html
26 Thank you!