Economic and Fiscal Overview
Ontario continues to face a period of heightened economic uncertainty amid unwarranted U.S. trade and tariff tensions, ongoing geopolitical conflicts and disruptions to global supply chains. These external pressures are weighing on economic growth and creating challenges for businesses and workers across the province. Despite these challenges, Ontario's economy has remained resilient and the government's plan continues to support growth, protect jobs and build long-term prosperity.
Ontario’s prudent fiscal management has provided the flexibility needed to respond to challenging economic conditions while continuing to invest in priorities that matter to families and communities. The government's plan balances responsible fiscal stewardship with investments in essential public services and critical infrastructure.
Economic Outlook
Ontario’s real gross domestic product (GDP) is projected to grow by 0.5 per cent in 2026 and is expected to pick up in subsequent years, with increases of 1.5 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 has remained resilient despite ongoing economic uncertainty. Following a decline of 53,000 jobs in the first quarter of 2026, employment rebounded by 62,000 jobs in the second quarter and by a further 36,000 in the third quarter. Employment gains so far in 2026 have been concentrated in full-time positions and in the private sector. Ontario’s unemployment rate has been trending downward recently. As of the third quarter of 2026, the unemployment rate reached the lowest it has been since the third quarter of 2024.
Looking ahead, employment growth is projected to rise as economic growth strengthens, leading to a decrease in the unemployment rate from 7.2 per cent in 2026 to 6.1 per cent in 2029.
Fiscal Outlook
The 2026 Ontario Economic Outlook and Fiscal Review is projecting a deficit of $16.9 billion in 2026–27. This compares to a projected deficit of $13.8 billion in 2026–27 in the 2026 Budget. The government now projects deficits of $12.7 billion in 2027–28 and $6.7 billion in 2028–29, followed by a return to a surplus of $0.2 billion in 2029–30. Reflecting ongoing economic uncertainty and the impacts of U.S. tariffs and trade disruptions, the fiscal outlook has deteriorated since the 2026 Budget and the path to balance has been extended to 2029–30.
Revenues in 2026–27 are projected to be $2.0 billion higher than forecast in the 2026 Budget, while lower by $3.9 billion in 2027–28 and $4.9 billion in 2028–29.
Program expense is projected to increase over the outlook primarily due to increased contingencies and sustained investments in key public services and sectors such as auto and steel. This remains consistent with the program expense outlook projected in the 2026 Budget.
Ontario is forecast to pay $17.4 billion in interest costs in 2026–27, a slight increase from the forecast in the 2026 Budget. Interest and Other Debt Servicing Charges is projected increase in each year of the outlook. The net debt-to-GDP ratio is forecast to be 37.4 per cent in 2026–27, 0.3 percentage points lower than the 37.7 per cent forecast in the 2026 Budget. Over the outlook, the net debt-to-GDP ratio is forecast to remain below Ontario’s target of 40.0 per cent.
The reserve has been increased since the 2026 Budget. This increase reflects ongoing extraordinary circumstances including significant trade-related risks to Ontario’s economic outlook, as well as the estimated impact of the proposed federal Productivity Mega Deduction. In addition, the government has increased the Contingency Fund by an additional $3.8 billion in 2026–27 to provide greater fiscal flexibility and help manage risks associated with heightened economic uncertainty and the escalation of the U.S. trade tensions.