#1RESPONSIBLE PROGRESS Manitoba's Economic, Fiscal and Borrowing Program Update December 2019 Manitoba#22 PROVINCE OF MANITOBA RESPONSIBLE PROGRESS | DECEMBER 2019 Prince Rupert ✓ Central geographical location ✓ Fifth-largest provincial population at almost 1.4 million and one of the fastest growing in Canada Nominal Gross Domestic Product is $72.4 billion in 2018, among the most diversified and most stable economies in Canada Sound credit rating Moody's: Aa2 (stable) S&P: A+ (positive) DBRS: A (high) The Progressive Conservative Party of Manitoba was elected to a second consecutive majority with 36 of 57 seats on September 10, 2019 Next provincial election is on or before October 3, 2023 Vancouver LEGEND Inland Port Partners CN Rail Lines Rankin Inlet Churchill Thompson Edmonton Saskatoon Calgary Winnipeg. Regina Fort Worth Dallas San Antonio CP Rail Lines BNSF Rail Lines Other Rail Lines Highway Routes Guanajuato Manzanillo Lazaro Cardenas -Minneapolis-St. Paul Des Moines Kansas City Chicago New Orleans Quebec Montreal Ottawa Toronto Windsor Detroit#33 MANITOBA GOVERNMENT BUDGET 2019/20 RESPONSIBLE PROGRESS | DECEMBER 2019 Revenues Government Business Enterprises 5% Federal Transfers 28% Justice 4% Expenses Debt Servicing 6% Other 13% Health 38% Own Source Revenue 67% Families 13% Education 26% Manitoba#4MANITOBA BUDGET RESULTS RESPONSIBLE PROGRESS | DECEMBER 2019 200 0 Summary Budget Plan vs. Budget Result of Net Income (Deficit), 2011-12 to 2019-20b (Millions of Dollars) (f = forecast and b = budget) Previous Government (200) (400) Budget Plan (438) Budget Plan (357) Budget Plan (460) Budget Plan (422) Budget Plan (518) (600) Budget Result (560) Budget Result Budget Result (600) (539) (800) (1,000) (1,200) Budget Result (1,001) 2011-12 2012-13 2013-14 2014-15 2015-16 (932) New Administration Budget Result (163) Budget 2019 Plan (360) Budget Result Budget Result (694) Budget Plan (521) (789) Budget Plan Budget Result Budget Plan (840) (911) 2016-17 2017-18 2018-19 2019-20b Manitoba#55 MANITOBA BUDGET PLANNED PATH TO BALANCE RESPONSIBLE PROGRESS | DECEMBER 2019 698 700 600 521 500 470 Summary Budget Net Income Projection (Millions of Dollars) (f = forecast) 549 ... Plan in Budget 2017 --Plan in Budget 2019 --Plan in Budget 2018 Revised 2019 Forecast generally tracking as per Budget projections 388 400 2018/19 improvement reflects one-time 360 280 300 revenues and savings, not expected to re-occur 273 200 100 (100) 163 142 234 128 101 2018/19 2019/20 2020/21f 2021/22f Revised 2019 Plan Reflects projected balanced budget by 2022/23 28 (39) 2022/23f Manitoba#66 MOVING FORWARD TO A SUSTAINABLE PATH RESPONSIBLE PROGRESS | DECEMBER 2019 Manitoba Expenditures and Net Debt are Middle Among Canadian Provinces: ✓ Per capita total expenditures at $12,633 per person in 2018/19, ranked 6th lowest among 10 provinces ✓ Five year average growth at 2.8% is fifth among provinces Total Expenditures, 5-Year Average Annual Growth, 2009/10 - 2018/19 (Compounded Average Annual Per Cent) ✓ Manitoba's net debt to GDP ratio was 34.6% in 2018/19. 6th lowest among provinces Manitoba's net debt to GDP ratio is below the federal level Net Debt to GDP, Provinces and Federal Government, 2018/19 (Per Cent) 7.0 5.8 6.0 5.1 5.0 4.0 3.0 2.0 1.0 10 0.0 0.0 2009-10 2010-11 2011-12 2012-13 6.1 3.5 50.0 45.8 45.0 40.3 39.6 40.0 37.7 34.5 34.6 34.8 35.0 4.2 31.4 3.9 3.6 30.0 3.5 25.0 2.8 2.2 20.0 14.3 14.4 15.0 10.0 8.0 5.0 2013-14 2014-15 2015-16 2016-17 2017-18 2018-19 0.0 AB BC SK ΡΕΙ SN MB CAN NB ON QC NL Manitoba#7MANDATE TO RESTORE CREDIT RATING RESPONSIBLE PROGRESS | DECEMBER 2019 "On Oct. 4, 2019, S&P Global Ratings revised its outlook on the Province of Manitoba to a positive from stable." (S&P October 4, 2019) "Strong cost containment is helping to reduce after-capital deficits while the wind-down of large-scale capital projects at Manitoba Hydro should lessen the utility's borrowing needs in the next few years. We are therefore revising our outlook to positive from stable. (S&P October 4, 2019) "The gradual pace of deficit reduction reflects the government's objective of balancing the budget in a measured and responsible fashion without jeopardizing service delivery, while reducing the overall tax burden and making life more affordable for Manitobans." (DBRS Rating Report-May 2, 2019) Moody's Credit Ratings S&P Credit Ratings BC Aaa BC AAA SK Aaa SK AA AB Aa1 ос AA - MB Aa2 NS A... ос Aa2 MB NB Aa2 AB NS Aa2 ON PE Aa2 NB ON Aa3 1 2 3 2 2 A+ A+ A+ A+ PE A NL A1 NL A 7 Manitoba#8STRONG ECONOMIC GROWTH RESPONSIBLE PROGRESS | DECEMBER 2019 ✓ Jobs and growth are not concentrated in a single. sector ✓ Long-term economic development is balanced by growth among various medium-sized sectors. ✓ The most stable economic growth among Canadian provinces ✓ Manitoba is now consistently posting among the fastest average annual real GDP growth in Canada ✓ Long-term growth above the national average since 2009 (10-year average annual real GDP growth) 10-Year Average Annual Growth in Real GDP: Manitoba and Canada, 2007 - 2018 (Compounded Average Annual Per Cent) 3.5 3.2 3.0 2.6 2.5 2.0 1.5 Manitoba Canada 2.0 80 1.0 2007 2009 2011 2013 2015 2017 Manitoba#9JOBS AND LABOUR MARKET RESPONSIBLE PROGRESS | DECEMBER 2019 ✓ Employment growing by 1.2% so far in 2019 ✓ Unemployment rate is averaging 5.4% in 2019, below Canada's 5.7% rate and down from 6.0% in 2018 ✓ Number of unemployed persons has fallen by 10.4%, one of the largest reductions among provinces (3rd best in Canada) Private sector employment growing by 1.5% in 2019 ✓ Manufacturing employment is up 5.6% this year, the second strongest among provinces and much higher than Canada's growth of 0.5% 9 Manitoba Employment Level, Q1 2016 -Q2 2019 (12-month rolling total) (Thousands of Jobs) 655.0 650.0 645.0 640.0 635.0 630.0 625.0 620.0 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q2 2016 Q1 2016 Manitoba#1010 10 POPULATION AND HOUSING RESPONSIBLE PROGRESS | DECEMBER 2019 ✓ Manitoba's population has increased by 1.4% annually over the last five years, third highest in Canada and well above Canada at 1.2% annual growth 8,500 8,000 ✓ Housing starts have increased 22.5% through the first half of 2019, the second strongest increase among the provinces 7,500 7,000 6,500 o 14,877 new housing units started in the last two years (2017/18), best two year total in 31 years 6,000 5,500 5,000 o 5,836 apartment units added in the last two years (2017/18), best two year total in 39 years 4,500 4,000 Q1 2016 Manitoba Housing Starts, Q1 2006-Q2 2019 (12- month rolling total) (Number of Housing Units Started) Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Manitoba#111=1 11 CONSTRUCTION AND INVESTMENT RESPONSIBLE PROGRESS | DECEMBER 2019 ✓ Building permits are up 15.6% this year, on track for a 48% increase since 2015 ✓ Private sector capital investment increased by 10.1% in 2018, the strongest increase among provinces 2,100 2,000 1,900 ✓ Statistics Canada estimates that Manitoba's private capital investment will grow 4.5% this year, the third year in a row that private investment has outpaced Canada 1,800 1,700 ✓ Capital spending on machinery and equipment is expected to grow 6%, the strongest increase among provinces 1,600 1,500 1,400 Non-Residential Capital Investment in Buildings, Q1 2016-Q2 2019 (12-month rolling total) (Millions of Dollars) Q1 2016 Q2 2016 Q3 2016 Q4 2016 Q1 2017 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Manitoba#1212 ENCOURAGING PRIVATE SECTOR INVESTMENTS RESPONSIBLE PROGRESS | DECEMBER 2019 ✓ Reduced the number of red tape regulatory requirements by more than 24,000 1000 ✓ Leading the nation in private sector capital investment in 2018 900 800 ✓ Leading the nation in manufacturing capital spending since 2015 700 600 Canada Goose Ubisoft 。 Roquette 500 。 Simplot 400 ○ Amazon Web Services BellMTS 300 200 o Maple Leaf Foods o McCain Foods ✓ Film industry growing; $250 million worth of production expected for 2018/19 CN Rail 100 True North Square 0 Capital Investment In Manufacturing, 2006- 2019 (Millions of Dollars) (i = intentions) 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019i Manitoba#13MOST STABLE ECONOMY IN CANADA RESPONSIBLE PROGRESS | DECEMBER 2019 GDP by Industry Shares, 2018 Agriculture, Forestry Education Services. and Fishing 4.2% 5.6% Health and Social. Services 9.6% Mining, Oil and Gas 2.5% Utilities 3.4% Public Administration. 8.6% Accommodation, Food, Arts, Entertainment, Information and. Culture 5.4% Administration, Management of Companies and Other. Services 4.2% Professional and. Scientific 3.4% 13 Real Estate, Rental. and Leasing 3.9% Finance and Insurance 5.6% Construction 7.6% Manufacturing 9.8% ✓ Economic activity and jobs are not focused on one particular sector. ✓ Long-term progress is balanced by growth across different sectors. Wholesale 4.8% Goods-Producing Commercial Services Retail 5.8% Non-Commercial Transportation and Warehousing 6.7% Services Manitoba#1414 MANITOBA'S BROAD EXPORT BASE RESPONSIBLE PROGRESS | DECEMBER 2019 ✓ 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 MISSIONS FUEL CELL ELECTRIC ZERO EMISSIONS HYDROGEN POWERED NEW FLYER SR 1925 MacDon Manitoba Pork#1515 ECONOMIC OUTLOOK 2019F-2020F RESPONSIBLE PROGRESS | DECEMBER 2019 ✓ Forecasts reflect moderating growth in Canada, U.S. and China, which are Manitoba's key export markets ✓ Manitoba has a number of large commercial and industrial capital projects currently underway and recently announced that will offset some of the downward pressure Manitoba Finance Survey of Economic Forecasts (As at December 2019) 2019f 2020f Manitoba Canada Manitoba Canada Per Cent Growth Unless Noted (f= forecast) Real GDP 1.2 1.5 1.3 1.7 Nominal GDP 2.8 3.3 3.3 3.7 Employment 1.1 2.0 0.6 0.9 Unemployment Rate (%) 5.5 5.7 5.7 5.8 Consumer Prices 2.2 2.0 2.0 2.0 Manitoba#1616 NORTH AMERICA'S CLEAN ENERGY LEADER RESPONSIBLE PROGRESS | DECEMBER 2019 ✓ 97.2% of electricity generation is hydro, 2.7% is wind and 0.1% is thermal. ✓ Roughly 1/5 of the electricity generated is exported outside of Manitoba (U.S., Canada). ✓ Manitoba Hydro's current generation capacity is 5,561 MW, with an additional 5,110 MW more of potential generation identified. 10 8 00 + 2 Manitoba Hydro is currently investing in a major generation project and has put into service a major transmission project. 20 Retail Price of Electricity 18 (Cents/kWh $C) 16 14 12 Manitoba Quebec British Columbia Saskatchewan Texas Wyoming Kentucky North Dakota South Dakota Minnesota Wisconsin Ontario California Keeyask Hydro Generating Station Project Design Capacity: 695 MW Anticipated First Unit in Service Date: Fall 2020 Anticipated Cost: $8.7B Manitoba#1717 BORROWING REQUIREMENTS RESPONSIBLE PROGRESS | DECEMBER 2019 ✓ Budget 2019 was passed October 10, Expected borrowing requirements for budget 2019/20 are C$6.7 billion. Planned funding through both domestic and international capital markets. To date, we have funded C$5.0 billion, 84.4% of our needs for fiscal 2019/20. C$6.7 billion Refunding Maturing Debt $3.0 billion New Cash Requirements $740M Other Crowns & Org. $388M General Programs $3.7 billion $353M Capital Investments $2,200M Manitoba Hydro Manitoba#1818 FUNDING SOURCES RESPONSIBLE PROGRESS | DECEMBER 2019 CAD Public Debentures 55% CAD CAD AUD MTN FRN 8% CHF 3% EUR GBP ✓ Other Int'l Markets HKD ✔ 18% JPY ✓ NZD ✓ SEK ✓ USD Global 16% Notes: Funding sources are from 5 years Savings Bonds <0.5% (discontinued in 2016) Manitoba#19RESPONSIBLE PROGRESS More information at: www.manitoba.ca/finance/ Thank you! Manitoba