Ontario’s PC government is projecting a slightly smaller deficit of $13.5 billion as it moves forward with its plan to spend billions of dollars to bolster Ontario’s economy in the face of U.S. tariffs.
Rising at Queen’s Park to deliver a fall economic update at Queen’s Park Thursday, Finance Minister Peter Bethlenfalvy said Ontario “finds itself in a very different place than it did seven years ago.”
He lauded the province’s GDP growth since then, but also said U.S. tariffs continue to make “an already-uncertain global economy even more challenging and unpredictable.”
The provincial budget unveiled in May included billions of dollars for roads, bridges and transit in the face of tariff threats from U.S. President Donald Trump, as well as billions of dollars for various funds meant to help shore up businesses and jobs in the face of the trade war.
The fall update continues on that theme, with few major changes.
Despite all that spending, the province said Thursday the deficit this year is now projected at $13.5 billion, compared to a projected 14.6 billion in the spring budget. The smaller deficit comes amid higher than expected revenue for 2025-26 of $223.1 billion — $3.2 billion more than forecast in the spring budget. The province says the increase is driven mainly by stronger tax revenue and broader public sector revenue.
Bethlenfalvy says the province is providing a $100 million injection into the Ontario Together Trade Fund – an initiative meant to help businesses impacted by trade disruptions – bringing it up to a total of $150 million.
Previously announced initiatives include removing the HST on new homes up to $1 million first-time homebuyers, $1.1 billion for home care, scrapping fixed election dates and raising the political donation limit to $5,000.
Weaker economic indicators
While there were no major changes to the government’s plan, the economic update does reflect a situation where tariffs continue to chip away at Ontario’s finances, though government officials caution it is very difficult to factor in the tariffs precisely because they keep changing.
Real GDP growth is expected to dive from 1.4 per cent in 2024 to 0.8 per cent this year. It’s projected to climb to 0.9 per cent in 2026 and 1.8 per cent in 2027.
Housing starts are worse than projected in the spring, just 64,300 compared to a projection in May of 71,800. The projection for housing starts for the next three years has also been adjusted downward by a few thousand each year compared to projections in the spring.
Ontario is also projecting higher unemployment rates over the next few years, compared to the spring budget. The 2025 estimate has been adjusted to 7.8 per cent from 7.6 per cent in the spring. A rate of 7.6 per cent is expected in 2026, up an extra 0.3 per cent from the budget. That’s expected to drop to 7 per cent in 2027 and 6.5 per cent in 2028.
When it comes to job numbers, the province is projecting fewer new jobs created this year. While the spring budget forecast 73,000 new jobs this year, the government now says that number will be closer to 70,000.
While the province is now projecting 2,000 more jobs will be created in 2026 than the budget suggested, that number is still low — just 35,000. It is also projecting just 66,000 new jobs in 2027, compared to 74,000 projected in the spring.
Long-term, it has a rosier projection for 2028 – 83,000 new jobs compared to a spring projection of 75,000.
Ontario’s overall debt stands at $460.8 billion for 2025-26 and is expected to climb to $487 billion in 2026-27, reaching $501 billion in 2027-28
Balance forecast for 2027-28
Despite the choppy economic waters, the province continues to project a path back to balance
The government expects to have a smaller deficit of $7.8 billion in 2026-27 and eventually balance the books and show a small surplus of $200 million on 2027-28.
The province says there are some things that could support stronger growth than projected, such as a “mutually favourable” trade deal with the U.S. and in the longer term, new technologies such as artificial intelligence.
While the fall economic statement represents the government’s latest thoughts about the state of the economy, officials caution that it comes at a shorter interval from the budget than usual, with the government obliged to deliver a fiscal update by Nov. 15. They says the federal budget only coming down two days earlier also made it difficult to plan for any sort of new direction.
