Ontario’s Economic and Fiscal Outlook in Brief

Ontario’s Economic and Fiscal Outlook in Brief

Trade tensions and tariffs in 2025 have led to greater economic uncertainty and contributed to a weaker global economic outlook. Ontario’s economy has been resilient. However, it is being negatively impacted by U.S. trade policy and the accompanying uncertainty. Following a strong start to the year, Ontario’s real gross domestic product (GDP) growth declined in the second quarter of 2025 alongside the implementation of U.S. tariffs. Ontario’s economy is projected to continue growing, in line with the 2025 Budget outlook, with real GDP projected to rise 0.8 per cent in 2025 and 0.9 per cent in 2026. However, a mutually favourable trade outcome between Canada and the United States could support stronger-than-expected Ontario economic growth. In the longer term, investment in, and the application of new technologies, such as artificial intelligence, could create opportunities for improved productivity and economic growth.

The 2025 Ontario Economic Outlook and Fiscal Review continues to take a fiscally responsible and balanced approach through sustained investments in key public services, while maintaining fiscal flexibility to respond to uncertainty. This approach has allowed the government to maintain a path to balance as part of its fiscal plan. The government is projecting deficits of $13.5 billion in 2025–26 and $7.8 billion in 2026–27, followed by a surplus of $0.2 billion in 2027–28. Ontario is prepared to do whatever it takes to provide critical financial supports to protect Ontario workers and jobs.

The net debt-to-GDP ratio is projected to be 37.7 per cent in 2025–26, compared with the forecast of 37.9 per cent projected in the 2025 Budget. This ratio fell to a 13-year low last year, and Ontario’s plan keeps it below target levels over the medium-term outlook. Further illustrating Ontario’s commitment to responsible fiscal management, the net interest as a per cent of operating revenue ratio for 2025–26 is forecast to be 6.4 per cent and remains close to the lowest levels it has been at since the 1980s.

Ontario’s Economic Outlook

Ontario’s real GDP growth has been impacted by U.S. trade policy and tariffs and is projected to decelerate from 1.4 per cent in 2024 to 0.8 per cent in 2025 and 0.9 per cent in 2026, in line with the projections at the time of the 2025 Budget. Real GDP growth is expected to pick up in subsequent years with projected increases of 1.8 per cent in 2027 and 1.9 per cent in 2028. For the purposes of prudent fiscal planning, these projections are set slightly below the average of private‑sector forecasts.

Revisions to the Outlook Since the 2025 Budget

The outlook has been revised compared to the projections in the 2025 Budget. Key changes since the 2025 Budget include the following:

• Slightly stronger nominal GDP growth in 2025 due to an upward revision to the growth in net operating surplus of corporations;
• Slightly lower real GDP growth in 2026 and 2027; and
• Weaker housing resale market activity through the projection period.

Managing Ontario’s Finances Responsibly

The government’s plan is consistent with the Fiscal Sustainability, Transparency and Accountability Act, 2019 and its governing principles that guide Ontario’s fiscal policy.

• Transparent: The government continues to be transparent through the release of regular fiscal updates. This is the eighth year in a row that the government has received a clean audit opinion from Ontario’s Auditor General.
• Responsible: The government has developed a measured and accountable approach to managing Ontario’s finances, while investing in critical programs, services and capital projects.
• Flexible: The government’s plan has built in appropriate levels of prudence in the form of contingency funds and a reserve to ensure the necessary fiscal flexibility is available to respond to changing circumstances.
• Equitable: The government’s plan sustains investments in key public services, such as health care, social services and education, ensuring that these services are readily available for the people of today and maintained for the benefit of future generations.
• Sustainable: The government remains committed to achieving a balanced budget and reducing the province’s debt burden to ensure the long-term sustainability of Ontario’s finances.

The government recorded a $1.1 billion deficit for the fiscal year ending March 31, 2025, compared to a forecasted deficit of $9.8 billion in the 2024 Budget. The government remains focused on its efforts to reduce the debt burden and bring Ontario’s finances back to balance.

Ontario’s finances are in the strongest position they have been in over a decade. This fiscal plan includes near-record-low net interest-to-operating revenue anticipated from 2025–26 to 2027–28.

Reflecting these improvements, Ontario received two credit rating upgrades in 2024. Morningstar DBRS upgraded Ontario’s rating to AA from AA (low) on June 6, 2024, and S&P raised its credit rating to AA− from A+ on December 3, 2024. This reverses the trend of credit downgrades and shows that Ontario’s prudent and responsible fiscal plan is working. A higher credit rating means Ontario is seen as a lower-risk borrower. This reduces Ontario’s borrowing costs and supports investment in the province, creating more jobs while financing the government’s historic infrastructure plans. Since the credit rating upgrades, Ontario has seen new international buyers of its bonds and now has the lowest interest rate of all provinces in the 30-year term.

Ontario’s Fiscal Plan

In 2025–26, the government is projecting a deficit of $13.5 billion. Over the medium term, the government is forecasting a deficit of $7.8 billion in 2026–27 and a surplus of $0.2 billion in 2027–28.

Revenue Outlook Over the Medium Term

Ontario’s revenue outlook is anchored by an economic projection based on private-sector forecasts and the best available information at the time of finalizing the planning projection. Between 2024–25 and 2027–28, revenues are expected to grow, on average, by 2.0 per cent a year. Details of the medium-term revenue outlook are outlined later in this document. See Chapter 3: Ontario’s Fiscal Plan and Outlook for more details.

Key inputs included in the revenue forecast are a prudent economic outlook based on private‑sector forecasts; existing federal–provincial agreements and funding formulas; and the business plans of government ministries, business enterprises and service organizations.

Program Expense Outlook Over the Medium Term

The government is maintaining a strong fiscal foundation while continuing to sustain investments in key public services. Ontario’s program expense outlook is expected to grow from $212.1 billion in 2024–25 to $220.1 billion in 2027–28. Over the medium term, this reflects the government’s commitment to key public services such as health care, education and infrastructure.

As part of the government’s strategy for responsible fiscal management, the government will continue to ensure that program expense growth does not outpace revenues. In addition, contingencies have been incorporated into the program expense outlook to ensure fiscal stability and the ability to respond to unforeseen events.

See Chapter 3: Ontario’s Fiscal Plan and Outlook for further details on the program expense outlook over the medium term.

Interest and Other Debt Servicing Charges (IOD) Outlook Over the Medium Term

Interest and other debt servicing charges is forecast to be $16.2 billion in 2025–26, $16.9 billion in 2026–27 and $17.7 billion in 2027–28 and remains consistent with the forecast for each of the medium-term outlook years in the 2025 Budget.

See Chapter 4: Borrowing and Debt Management for further details on the outlook over the medium term.

Other Fiscal Planning Assumptions

The reserve has been set at $2.0 billion each year from 2025–26 to 2027–28, unchanged from the levels in the 2025 Budget. This higher-than-average historical level of reserve reflects the elevated nature of fiscal and economic risks, and the government’s commitment to be ready to respond.

Net debt-to-GDP for 2025–26 is projected to be 37.7 per cent. Over the medium term, the net debt-to-GDP ratio is forecast to be 38.7 per cent in 2026–27 and 38.4 per cent in 2027–28. The increase in this ratio is due to the rate of growth in net debt outpacing growth in GDP. The ratio is forecast to remain below the government’s target of 40.0 per cent and resume its decline by fiscal 2027–28.

Economic and Fiscal Outlook Scenarios

To provide more transparency about the province’s economic outlook amid the elevated degree of economic uncertainty, the Ontario Ministry of Finance has developed Faster Growth and Slower Growth scenarios that the economy could take 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. See Chapter 2: Economic Performance and Outlook for more details.

In the event that the alternative economic scenarios materialize, as opposed to the Planning Projection, Ontario’s fiscal plan would also change as a result.

Based on the two alternative nominal GDP growth economic scenarios, two taxation revenue outlook scenarios were developed.

In the Faster Growth scenario, total taxation revenue over the medium term is $9.4 billion higher than the Planning Projection in 2027–28, while in the Slower Growth scenario, total taxation revenue is $8.5 billion lower.

Under the Faster Growth scenario, the deficit outlook may improve to $11.0 billion in 2025–26, $0.7 billion in 2026–27, followed by a surplus of $10.2 billion in 2027–28. However, if the Slower Growth scenario takes place instead, the deficit outlook may deteriorate to $15.7 billion in 2025–26, $14.5 billion in 2026–27 and $8.9 billion in 2027–28.

Borrowing and Debt Management

Ontario’s long-term borrowing requirement for 2025–26 is now forecast to be $42.5 billion. As of October 30, 2025, Ontario had completed $32.4 billion, or 76 per cent, of its 2025–26 total long-term public borrowing program. Ontario’s borrowing program is partly driven by a historic capital plan. See the section titled “Ontario’s Capital Plan.”

Ontario is forecast to pay $16.2 billion in interest and other debt servicing charges in 2025–26, consistent with the 2025 Budget forecast.

Interest and other debt servicing charges in 2026–27 and 2027–28 is forecast to be $16.9 billion and $17.7 billion, compared to the 2025 Budget forecast of $17.0 billion and $17.8 billion, respectively. As a share of revenue, interest and other debt servicing charges is projected to remain near record lows through 2027–28.

A one percentage point change in interest rates either up or down from the current interest rate forecast is estimated to have a corresponding change in Ontario’s borrowing costs by around $0.8 billion in the first full year.

The net debt-to-GDP ratio in 2025–26 is now projected to be 37.7 per cent, or 0.2 percentage points lower than the 37.9 per cent forecast in the 2025 Budget, which is mainly due to a lower than previously projected deficit. Over the medium-term outlook, the net debt-to-GDP ratio is projected to remain modestly lower than the forecasts in the 2025 Budget and continues to remain below target levels. The table below shows the progress on relevant debt sustainability measures; see Chapter 4: Borrowing and Debt Management for more details on Ontario’s debt burden reduction strategy.

Ontario’s Capital Plan

Ontario’s Capital Plan continues to be the most ambitious plan to build in Ontario’s history, with planned investments over 10 years totalling more than $201 billion, including over $33 billion in 2025–26. To address the historic infrastructure deficit, built up over past decades, this plan is getting shovels in the ground to build highways, hospitals and other critical assets, laying the foundation for a stronger Ontario.

Key highlights in the capital plan include the following:

Building Highways

Nearly $30 billion over 10 years to support the planning and construction of highway expansion and rehabilitation projects across the province, including:

• Highway 413, a new 400-series highway and transportation corridor across Halton, Peel and York Regions that will support future population growth in the Greater Golden Horseshoe, bring relief to one of the busiest corridors in North America and save drivers up to 30 minutes each way on their commute;
• Bradford Bypass, a new four-lane freeway connecting Highway 400 in Simcoe County and Highway 404 in York Region, which will save drivers an estimated 35 minutes in travel time;
• Feasibility work for a Highway 401 tunnel expressway to help relieve gridlock and improve the effectiveness of infrastructure;
• The Queen Elizabeth Way (QEW) Garden City Skyway Bridge Twinning project, which includes construction of a new bridge on the QEW over the Welland Canal, connecting the City of St. Catharines to the Town of Niagara-on-the-Lake;
• Enhancing Highway 401 to improve safety and traffic flow, and support economic development through resurfacing, bridge repairs, interchange improvements and ramp upgrades across the province;
• Widening existing corridors across the province, such as Highway 11/17 between Thunder Bay and Nipigon, and Highway 17 between Kenora and the Manitoba border;
• Supporting the planning and design for a new interchange connecting Highway 401 to the future Lauzon Parkway extension in Windsor, which will support increased opportunities for trade and improved access to the Windsor–Detroit border;
• Continuing progress on uploads of the Gardiner Expressway and Don Valley Parkway, including providing $73 million in funding to speed up the repair of the Gardiner Expressway and accelerate rehabilitation work by more than one year;
• Providing funding for the maintenance and rehabilitation of Ottawa Road 174 while a three-stage phased assessment of potential provincial ownership of the road is underway;
• Widening Highway 3 from two to four lanes between Essex and Leamington to improve road safety and keep people and goods moving in Southwestern Ontario; and
• Supporting renewed partnerships with First Nations to build and improve highway infrastructure that will promote equity and help connect more First Nation communities to the province’s highway network.

Building Transit

Approximately $61 billion over 10 years for public transit, with a variety of projects underway, including:

• Building the largest subway expansion in Canadian history: the Ontario Line, the Scarborough Subway Extension, the Eglinton Crosstown West Extension and the Yonge North Subway Extension — as part of the government’s plan to slash commute times across the Greater Toronto Area (GTA) and promote integrated and efficient transportation service delivery;
• Building and expanding Light Rail Transit (LRT): the Hamilton LRT, Hazel McCallion Line, Eglinton Crosstown and Finch West LRT, which will provide more people with fast, affordable and reliable transit;
• Investing over $758 million to help the Toronto Transit Commission (TTC) purchase 55 new Ontario-made trains for Toronto’s Line 2 subway;
• Investing $850 million to refurbish GO Transit rail cars as part of the ongoing service expansion across the GO rail network and to support hundreds of manufacturing jobs and economic growth in Northern Ontario;
• Bringing back the Northlander, which will provide safe and reliable transportation options between Northern Ontario and Toronto, with new fully accessible and state-of-the-art trains; and
• Constructing the East Harbour Transit Hub, which will improve access to transit for thousands of residents and support more than 50,000 jobs in the area.

Building Health Infrastructure

The government’s plan will lead to the creation of approximately $56 billion over 10 years in health infrastructure, including over $43 billion in capital grants to support more than 50 major hospital projects. These investments will add approximately 3,000 new beds over the next decade, significantly increasing access to health care across the province. Key projects include:

• Lakeridge Health Bowmanville Site Redevelopment: Expansion of the hospital’s inpatient and ambulatory care services and the emergency department will result in the addition of up to 32 new beds.
• Niagara Health System – Welland Refurbishment: A planning grant was approved to progress the Welland hospital site refurbishment project. The project includes renovations and infrastructure upgrades at the Welland site to support the provision of care.
• Trillium Health Partners – Broader Redevelopment: This project will add over 600 hospital beds to enhance system capacity and patient care. It will expand acute care services in Mississauga and consolidate complex continuing care and rehabilitation services at the Queensway site. Construction at Queensway has begun, with the contract awarded for the Mississauga site.
• University Health Network – West Park Reactivation Care Centre: The multi-phased plan will renovate and repurpose the East and West wings of the former West Park Healthcare Centre to increase bed capacity and alleviate system pressures. Phase 1 ensured the transfer of 94 patients in summer 2024, and Phases 2 and 3 will gradually increase occupancy up to a total of 188 net new beds in 2026.
• William Osler Health System – Peel Memorial Phase 2: Transforming the existing site into a new inpatient hospital with up to 250 beds for post-acute care, and a 24/7 Emergency Care Centre, will connect more people to a wide range of emergency and urgent medical care.
• North York General Hospital – Inpatient Redevelopment: This project will add up to 96 new beds and includes expanding surgical facilities and support services through the completion of a new patient care tower.
• University Health Network – Toronto Western Hospital New Patient Care Tower: Construction of a new 15-storey tower at the Toronto Western Hospital site in downtown Toronto will add 82 new acute-care beds and 20 state-of-the-art operating rooms.
• Halton Healthcare Services – Shelled Space: This project will add up to 123 beds within the next 18 to 24 months through renovation of existing space in the Oakville Trafalgar Memorial Hospital and Milton District Hospital to serve as a regional hub.
• The Ottawa Hospital – Civic Campus Redevelopment: The new hospital will have an increased number of single patient rooms and the most advanced trauma centre in Eastern Ontario and will provide highly specialized emergency and trauma services to treat complex injuries and illnesses.
• New Windsor-Essex Regional Hospital: The project will support a new state-of-the-art acute care hospital in Windsor and Essex County to add more hospital beds and expand services in the region.

Building Long-Term Care Homes

Planned investments that total a historic $6.4 billion since 2019 are in place to build 58,000 new and upgraded long-term care beds across the province by 2028 to modern design standards. As of October 2025, 24,101 beds (148 projects) are either opened, under construction, or have the approval to start construction, including:

• 104 long-term care homes that have advanced to construction between April 2022 and October 2025, including projects supported by the new 2025 Capital Funding Program, which builds on previous time-limited supplemental funding increases to stimulate and sustain more construction for long-term care homes across Ontario.

The government has also introduced new tools for the long-term care sector to support financing the development of long-term care beds with the support of the Building Ontario Fund.

Building Schools and Child Care Spaces

Investing over $30 billion over 10 years, including approximately $23 billion in capital grants, to build more schools and child care spaces, as well as support the repair and maintenance of existing schools. New schools include a joint French and English junior kindergarten (JK) to 12 public school in Blind River, a joint public and Catholic English elementary school in Cambridge, an English public secondary school in Oshawa, and an addition to Monsignor J.J. O’Neill Catholic School in Greater Napanee.

Building Postsecondary Education Infrastructure

Investing more than $5 billion in the Postsecondary Education sector over 10 years, including over $2 billion in capital grants to help colleges, universities and Indigenous Institutes modernize facilities by upgrading technology, supporting critical repairs and improving energy efficiency.

Building Municipal Housing-Enabling Infrastructure

Building municipal housing-enabling infrastructure projects, such as roads and water systems, through the Municipal Housing Infrastructure Program to support growing and developing communities.

Chart Descriptions

Chart: Current Fiscal Outlook Compared to the 2025 Budget

The bar chart illustrates the fiscal outlooks presented in the 2025 Budget compared to the current outlook in the 2025 Ontario Economic Outlook and Fiscal Review. The 2025 Budget projected deficits of $14.6 billion in 2025–26, $7.8 billion in 2026–27, and a surplus of $0.2 billion in 2027–28. With the release of the 2025 Ontario Economic Outlook and Fiscal Review, the deficit projections have been revised to deficits of $13.5 billion in 2025–26, $7.8 billion in 2026–27, and a surplus of $0.2 billion in 2027–28.

Source: Ontario Ministry of Finance.

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Chart: Ontario Fiscal Outlook Scenarios

The bar chart illustrates the range of Ontario deficit outlooks based on the two alternative economic scenarios presented in Chapter 2: Economic Performance and Outlook. The 2025 Ontario Economic Outlook and Fiscal Review fiscal outlook estimates the deficit to be $13.5 billion in 2025–26 and $7.8 billion in 2026–27, before reaching a surplus of $0.2 billion in 2027–28. Under the Faster Growth scenario, the deficit is estimated to be $11.0 billion in 2025–26 and $0.7 billion in 2026–27, followed by a surplus of $10.2 billion in 2027–28. Under the Slower Growth scenario, the deficits are estimated to be $15.7 billion in 2025–26, $14.5 billion in 2026–27 and $8.9 billion in 2027–28.

Source: Ontario Ministry of Finance.

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