Economic and Fiscal Overview
Like the rest of the world, Ontario continues to face economic challenges and uncertainty. Nevertheless, Ontario’s economy has demonstrated continued resiliency in the face of ongoing economic pressures. By taking a responsible approach to fiscal management without raising taxes on families or offloading costs on municipalities, the government is making progress on its plan to rebuild Ontario’s economy.
Economic Outlook
High interest rates are expected to continue negatively impacting Ontario’s economy in 2024, and the outlook for real GDP growth in 2024 has deteriorated significantly over the last year. Following estimated real GDP growth of 1.2 per cent in 2023, growth is projected to be 0.3 per cent in 2024, down from 1.3 per cent at the time of the 2023 Budget and 0.5 per cent at the time of the 2023 Ontario Economic Outlook and Fiscal Review. Real GDP growth is projected to increase to 1.9 per cent in 2025, and 2.2 per cent in 2026 and 2027. This also represents slower projected growth compared to the 2023 Budget and the 2023 Ontario Economic Outlook and Fiscal Review. For the purposes of prudent fiscal planning, these projections are slightly below the average of private‐sector forecasts.
Employment is projected to rise by 0.8 per cent in 2024, slowing from a 2.4 per cent increase in 2023. The unemployment rate over the outlook period is projected to remain below the recent historical average.
Geopolitical developments continue to pose a significant risk to the economic outlook. Global conflicts continue to disrupt commodity markets and supply chains. In addition, rising tensions are continuing to weigh on international trade in goods and services, which could impact Ontario’s key trading relationships in North America.
To provide more transparency about the province’s economic outlook amid this uncertainty, the Ontario Ministry of Finance has developed Faster Growth and Slower Growth scenarios that the economy could experience over the next few years. These alternative scenarios should not be considered the best case or the worst case, but reasonable possible outcomes in this period of uncertainty.
Fiscal Outlook
With the 2024 Budget: Building a Better Ontario, the government continues to maintain a responsible and flexible fiscal plan to respond to uncertainty and risks.
For 2023–24, the government is projecting a deficit of $3.0 billion. As part of its path to balance, the government is projecting deficits of $9.8 billion in 2024–25 and $4.6 billion in 2025–26, before reaching a surplus of $0.5 billion in 2026–27.
The 2024 Budget is projecting revenues in 2023–24 to be $204.3 billion — slightly lower than forecast in the 2023 Budget. Declines in taxation revenue and Government of Canada transfers are mostly offset by gains in net income from Government Business Enterprises and Other Non-Tax Revenue.
Since the 2023 Budget, projected revenues have decreased by $7.3 billion in 2024–25 and $8.5 billion 2025–26. This mainly reflects lower actual tax assessment information from the federal government and slower economic growth over the outlook period. The financial results of colleges are consolidated into the province’s financial statements. As a result of the federal government’s cap on international student study permit applications for two years, a significant downward revision to Broader Public Sector Colleges revenue is also contributing to the decline in 2024–25 and beyond.
Since the release of the 2023 Budget, the government has made targeted investments throughout the fiscal year to continue to make progress on Ontario’s Plan to Build while also investing in critical public services. The 2023–24 total expense outlook is $207.3 billion, $2.6 billion higher than the 2023 Budget.
The program expense outlook is projected to grow from $194.5 billion to $208.9 billion for an average annual growth rate of 2.4 per cent over the 2023–24 and 2026–27 period. The total expense outlook is projected to grow from $207.3 billion in 2023–24 to $224.1 billion in 2026–27.
The total expense outlook includes interest on debt expense, which is projected to increase from $12.8 billion in 2023–24, down from $14.1 billion forecast in the 2023 Budget, to $15.2 billion in 2026–27.
At 38.0 per cent, the net debt‐to‐GDP ratio in 2023–24 is forecast to be 0.2 percentage points higher than in the 2023 Budget, primarily due to a modestly higher than forecast deficit and investments in infrastructure. Over the medium-term outlook, the net debt-to-GDP ratio is forecast to stay below the debt burden reduction strategy target of 40.0 per cent.