Manitoba Finance: September 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 (about 4.5 times the area of New York)

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: A+ (stable)

2

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

A Balance in 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

-

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, 2017 Year-To-Date (In Dollars)

Firm Household Finances

7

Lowest Household Debt per Capita Among Provinces

0.11 0.19

0.26 0.32 0.33

0.40 0.46

0.70

1.50

-

0.20

0.40

0.60

0.80

1.00

1.20

1.40

1.60

ON BC CAN MB QC AB AC* SK U.S.

Stable Mortgage Financing

Mortgage Arrears: Delinquency Rate (90+ days) 2017 Year-To-Date (Per Cent)

* – Atlantic Canada Sources: Bank of Canada, Canadian Bankers Association and Federal Reserve of New York

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 8

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 9

5.3 5.4 6.2 6.2 6.3 6.5

8.1 8.2 8.3

9.9

14.6

0.0

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0

BC MB QC ON SK CAN AB NB NS PE NL

Among the Lowest Unemployment Rates and Among the Highest Labour Force Participation Rates in Canada

Unemployment Rate, 2017 Year-To-Date (Per Cent)

Improving Demand Condition in 2017

Source: Statistics Canada 10

-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

Averaging The Strongest Growth in Sales Since 2013

Manufacturing Sales, 2009 – 2017 Year-to-Date (Annual Growth in Per Cent)

Real GDP Growth, 2012 – 2018F (Per Cent)

Economic Performance

Sources: Statistics Canada, Manitoba Bureau of Statistics and Manitoba Finance Survey of Economic Forecasts 11

Economic Growth Expected to Moderate In the Near-Term

1.7

2.5 2.6

0.9

1.5

2.8

2.1

2.7 2.8

1.3

1.8 1.9

2.3

1.8

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

2012 2013 2014 2015 2016 2017F 2018F

Canada

ManitobaForecast

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 (As at September 2017)

12

2017f 2018f

Manitoba Canada Manitoba Canada

Percent Growth Unless Noted

Real GDP 2.3 2.8 1.8 2.1

Nominal GDP 4.6 5.5 3.6 4.1

Employment 1.4 1.6 0.8 1.0

Unemployment Rate (%) 5.4 6.5 5.4 6.3

Consumer Prices 1.7 1.8 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

a – actual, b – budget and p – projection Source: Manitoba Finance

(185) (181)

(1,001)

(560) (522)

(430)

(839)

(764)a

(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

(911)b

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.

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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

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 $4.5 billion, 67% 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 – Sep 15, 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 September 15, 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, 2017

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

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