FAO RELEASES 2025 ONTARIO BUDGET NOTE
TORONTO, May 29, 2025 – Today, the Financial Accountability Office of Ontario (FAO) released a report that provides an overview of the 2025 Ontario Budget, including the outlook for the economy, budget balance, debt burden, revenues and spending.
The government’s economic outlook in the 2025 budget has deteriorated since the 2024 Ontario Economic Outlook and Fiscal Review (FES), largely due to the impact of US tariffs and elevated geopolitical uncertainty. The 2025 budget expects Ontario real GDP, the broadest measure of economic activity, to grow by an average of 1.2 per cent a year from 2025 to 2027, 0.9 percentage points lower than the government’s outlook in the 2024 FES.
Following a budget deficit of $0.6 billion in 2023-24, the budget is projected to deteriorate to a deficit of $14.6 billion in 2025-26, before rapidly returning to balance in 2027-28. The budget’s path to balance in 2027-28 relies on revenue growth averaging 4.0 per cent in 2026-27 and 2027-28, with tax revenue growth higher than has been observed historically given the budget’s economic projection. At the same time, spending growth slows to an average annual rate of 0.7 per cent, well below projected growth in population and inflation.
The 2025 budget projects that the Province’s net debt will increase by $93.8 billion over the outlook, reaching $501.7 billion in 2027-28. This increase is due to $28.2 billion (30 per cent) in accumulated budget deficits over the period and a $65.6 billion (70 per cent) increase in non-financial assets, largely capital assets owned by the Province and the broader public sector (hospitals, colleges, school boards and children’s aid societies).
For more information, read the full report here.
Quick Facts:
- The 2025 budget’s outlook for real GDP growth is broadly in line with the FAO’s outlook in its report, The Potential Impacts of US Tariffs on the Ontario Economy. However, both economic outlooks are subject to significant tariff-related uncertainty.
- By 2026-27, all three of the government’s fiscal sustainability indicators in the 2025 budget will have deteriorated compared to the outlook in the 2024 FES. Two of these indicators (the net debt-to-GDP and net interest-to-operating revenue ratios) are projected to worsen but remain below the government’s targets. In contrast, the net debt-to-operating revenue ratio is projected to exceed the government’s target starting in 2025-26.
- Compared to the 2024 FES, projected revenues are a combined $1.0 billion lower over the three years from 2024-25 to 2026-27, while planned spending has increased by $20.6 billion.
About the FAO:
Established by the Financial Accountability Officer Act, 2013, the Financial Accountability Office of Ontario (FAO) provides independent analysis on the state of the Province’s finances, trends in the provincial economy and related matters important to the Legislative Assembly of Ontario.
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For further information, please contact:
Sophia Zhu | 416 931 5498 | SZhu@fao-on.org | fao-on.org