Economic and Fiscal Overview
Ontario, alongside jurisdictions around the world, continues to navigate a period of economic and geopolitical uncertainty. The global landscape continues to evolve as trade tensions and supply chain pressures impact the economy.
Despite these headwinds, Ontario’s economy has been resilient and performed better than expected in 2025. Real gross domestic product (GDP) is estimated to have increased by 1.2 per cent, up from 0.8 per cent at the time of the 2025 Budget. It is more imperative than ever that the government continue to make prudent and thoughtful decisions that enable continued investment in key public services and the province’s long-term prosperity, while maintaining fiscal flexibility to respond to changing conditions.
This is why the government is protecting Ontario by taking steps to become the most competitive place to invest and do business in the G7 through initiatives like its multi-year Tax Action Plan, reducing red tape, streamlining permits, removing interprovincial trade barriers, investing in infrastructure, supporting workers, improving services and making life more affordable.
Economic Outlook
In this period of economic and geopolitical uncertainty, Ontario’s economy has been resilient and performed better than expected in 2025. Ontario’s real GDP is projected to increase by 1.0 per cent in 2026 and growth is expected to pick up in subsequent years, with projected increases of 1.7 per cent in 2027, 1.8 per cent in 2028 and 2.0 per cent in 2029. For the purposes of prudent fiscal planning, these projections are set slightly below the average of private‐sector forecasts.
Ontario’s labour market also performed better than expected, with employment up by 80,900 net jobs in 2025, with nearly all gains in the private sector. Employment is projected to strengthen over the outlook period, and the unemployment rate is projected to decline from 7.7 per cent in 2025 to 6.2 per cent by 2029 in line with moderating population growth and improving economic conditions.
Fiscal Outlook
Ontario is projecting a path to a balance by 2028–29. The government is projecting deficits of $12.3 billion in 2025–26, $13.8 billion in 2026–27 and $6.1 billion in 2027–28, before planning for a surplus of $0.6 billion in 2028–29.
Revenues in 2025–26 are projected to be $226.6 billion, $6.7 billion higher than projected in the 2025 Budget. This increase largely reflects increases in taxation revenue, net income from Government Business Enterprises and other non-tax revenue. Over the medium term, total revenue is projected to increase from $226.2 billion in 2024–25 to $254.1 billion in 2028–29.
Program expense outlook is projected to be $222.4 billion, $6.1 billion higher than the 2025 Budget, primarily due to investments in health, postsecondary education, social services and justice. Program expense is projected to grow from $212.1 billion in 2024–25 to $231.3 billion in 2028–29.
Interest and Other Debt Servicing Charges (IOD) is forecast to be $16.0 billion in 2025–26, down from the 2025 Budget forecast of $16.2 billion. Over the medium-term outlook, IOD is forecast to be $17.2 billion in 2026–27, $18.6 billion in 2027–28 and $19.7 billion in 2028–29.
The net debt-to-GDP ratio is now projected to be 36.8 per cent in 2025–26, 1.1 percentage points lower than the 37.9 per cent forecast in the 2025 Budget. The ratio is projected to be 37.7 per cent in 2026–27, 38.5 per cent in 2027–28, and 38.2 per cent in 2028–29. This represents a modest improvement from the forecast in the 2025 Budget, attributed to stronger GDP growth. Beginning in 2026–27, the net debt-to-GDP ratio reflects the required revisions under the new Public Sector Accounting Standards.
This methodological change results in the ratio being 0.8 per cent lower in each of the three outlook years compared to what would have been reported under the previous calculation. The change does not affect Ontario’s fiscal plan, borrowing requirements, or debt management strategy.
The reserve in 2025–26 has been drawn down to $0.5 billion, to protect the fiscal plan against any unforeseen adverse changes in Ontario’s revenue and expense forecasts before year-end. In the 2026 Budget, the reserve is set at $1.5 billion in 2026–27, $2.0 billion in 2027–28, and $2.5 billion in 2028–29.
The Contingency Fund is maintained to help mitigate expense risks. For 2025–26, the Contingency Fund had a remaining balance of $100 million, which was made available to offset additional expenses that may materialize before the end of the fiscal year. For 2026–27, the Contingency Fund has a balance of $1.5 billion.