Economic and Fiscal Overview
Ontario’s economy continued to grow in the first half of 2024. The government’s plan retains a path to balance the budget in 2026–27, even with uncertain global economic conditions and other headwinds beyond the government’s control, including high interest rates and the federal carbon tax. The 2024 Ontario Economic Outlook and Fiscal Review continues to take a fiscally responsible and targeted approach by investing in the economy and infrastructure, keeping costs down and providing immediate relief to individuals and families.
Economic Outlook
Despite recent cuts to the Bank of Canada’s key policy interest rate, interest rates remain at high levels and are projected to continue weighing on economic growth in the near term. Ontario’s real GDP growth is projected to ease from 1.4 per cent in 2023 to 0.9 per cent in 2024. As interest rates continue to decline, real GDP growth is projected to increase to 1.7 per cent in 2025, and to 2.3 per cent in both 2026 and 2027.
Following employment growth of 2.4 per cent in 2023, slow economic growth is projected to contribute to a moderation in employment growth to 1.4 per cent in 2024, followed by 1.5 per cent in 2025. Employment growth is projected to average 1.3 per cent between 2026 and 2027, with an increase of over 444,000 net new jobs compared to 2023.
Fiscal Outlook
The government remains on track to achieve fiscal balance by 2026–27, while making targeted investments to support families, keep costs down and rebuild the economy. The government is currently projecting a deficit of $6.6 billion in 2024–25. Over the medium term, the government projects a deficit of $1.5 billion in 2025–26, followed by a surplus of $0.9 billion in 2026–27. This is a significant improvement compared to the 2024 Budget and reflects the government’s commitment to balancing the budget, reducing the deficit and putting Ontario’s finances on a sustainable path.
The 2024–25 total revenue outlook is $212.6 billion in 2024–25, $6.9 billion higher than projections in the 2024 Budget and the 2024–25 First Quarter Finances. The increase in the revenue forecast since the 2024–25 First Quarter Finances is mainly due to a stronger economic outlook in 2024, and higher taxation revenue from the projected impact of the federal government’s Budget 2024 announcement of the proposed changes to the capital gains inclusion rate.
Since the release of the 2024 Budget, the government has made targeted investments throughout the fiscal year. The 2024–25 total expense outlook is $218.3 billion, $3.8 billion higher than the 2024 Budget. Program expense is projected to be $205.5 billion, $5.0 billion higher than the forecast in the 2024 Budget, primarily due to a taxpayer rebate to individuals and families, and a top-up of the Contingency Fund to provide flexibility to protect important public services and quickly address unforeseen expense events that could materialize in the second half of the fiscal year.
Ontario’s net debt-to-GDP ratio is now forecast to be 37.8 per cent in 2024–25, compared with the forecast of 39.2 per cent in the 2024 Budget. Ontario’s net debt-to-GDP ratio fell to a 12-year low last year, and Ontario’s plan keeps this ratio at the lowest level in more than a decade, since 2011–12. Ontario is forecast to pay $12.7 billion in interest costs in 2024–25, about $1.2 billion lower than the 2024 Budget forecast.