TORONTO -- Ontario's fiscal watchdog says insolvencies in the province dropped by 24 per cent last year despite the start of the COVID-19 pandemic.

The Financial Accountability Office says the decline is unusual for a recessionary period and is due to a combination of factors.

The FAO says high levels of government aid, low interest rates and lender payment deferrals all helped keep businesses and households from declaring bankruptcy.

The report notes that insolvencies did jump in a number of sectors including educational services; information, culture and recreation; and real estate.

The watchdog says insolvencies could increase over the medium term because of ongoing economic challenges presented by the pandemic and the pace of withdrawal of government support.

Ontario reported the third-smallest rate of decline of total insolvencies in 2020, behind Alberta and Manitoba.

The Ontario government has introduced a series of measures to help small businesses survive several rounds of lockdowns caused by the COVID-19 pandemic.

In its 2021 budget, the government offered a second round of grants -- ranging between $10,000 and $20,000 -- to small businesses hit hard by the pandemic.

The province says it has set aside $1.7 billion for the program.

The Canadian Federation of Independent Business has said the pandemic has caused the closure of thousands of businesses and advocated for further changes to keep retailers afloat.