Economic and Fiscal Overview
Ontario’s economy is resilient, but it is also 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) declined in the second quarter of 2025 alongside the implementation of U.S. tariffs.
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.
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 same 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.
The year began with positive employment growth, rising in the first quarter of 2025, before declining in the second quarter. Industries particularly impacted by U.S. tariffs, such as manufacturing, transportation and warehousing, contributed to the second quarter employment decline. Employment growth is projected to rise 0.9 per cent in 2025, 0.4 per cent in 2026, 0.8 per cent in 2027 and 1.0 per cent in 2028.
Fiscal Outlook
Revenues in 2025–26 are projected to be $223.1 billion, $3.2 billion higher than projected in the 2025 Budget. This increase is largely driven by stronger taxation revenue and other non-tax revenue reported by the broader public sector. The 2025–26 total expense outlook is projected to be $234.6 billion, $2.1 billion higher than both the 2025 Budget and the 2025–26 First Quarter Finances projections.
The government is projecting a deficit of $13.5 billion in 2025–26, an improvement from the $14.6 billion deficit published in the 2025 Budget. The fiscal outlook for 2026–27 and 2027–28 remains consistent with the path outlined in the 2025 Budget.
The net debt-to-GDP ratio is now projected to be 37.7 per cent in 2025–26, 0.2 percentage points lower than the 37.9 per cent forecast in the 2025 Budget. Ontario’s net debt-to-GDP ratio fell to a 13-year low in 2024–25, and Ontario’s plan keeps this ratio below target levels over the medium-term outlook.
The 2025 Budget included a reserve of $2.0 billion in 2025–26, which has been maintained as part of the current fiscal outlook. This elevated reserve level demonstrates the government’s commitment to addressing uncertainty and prudent risk management. In addition, the Contingency Fund is maintained to help mitigate any expense risks. For 2025–26, after a $2 billion top-up in the 2025 Ontario Economic Outlook and Fiscal Review, the Contingency Fund has a projected balance of $4.5 billion.