FAO RELEASES ECONOMIC AND BUDGET OUTLOOK REPORT
TORONTO, September 17, 2025 – Today, the Financial Accountability Office of Ontario (FAO) released its outlook for Ontario’s economy and finances over the 2024-25 to 2029-30 period.
Based on trade policies as of August 5, 2025, Ontario real GDP growth, the broadest measure of economic activity, is projected to slow to 0.9 per cent in 2025 and 1.0 per cent in 2026 as US tariffs reduce demand for Ontario’s exports, and businesses cut back on investment and hiring. As Ontario’s economy adjusts to the impact of US tariffs over the rest of the outlook, real GDP growth is projected to return to its average long-term trend of 1.9 per cent per year. However, this implies that the level of Ontario’s real GDP would be 1.7 per cent lower in 2029 than in the absence of tariffs.
Based on the FAO’s outlook for the Ontario economy, and current government policies and announced commitments, the FAO projects that the budget balance will deteriorate from a deficit of $1.3 billion in 2024-25 to a deficit of $12.0 billion in 2025-26. The budget balance is projected to improve gradually over the following three years to a deficit of $7.9 billion in 2028-29. However, the FAO projects that the budget will not balance over the outlook, deteriorating to a deficit of $9.0 billion in 2029-30, as spending growth, led by the health sector and interest on debt, is expected to exceed revenue growth.
The FAO projects that the Province’s net debt will rise from $408.0 billion in 2023-24 to $549.3 billion in 2029-30, an increase of $141.4 billion (34.7 per cent). This increase is due to $52.2 billion in accumulated budget deficits over the period and an $89.2 billion increase in non-financial assets, largely infrastructure assets owned by the Province and the broader public sector.
In the 2025 Ontario Budget, the Province identified three fiscal sustainability targets, two related to the debt burden (the net debt-to-GDP ratio and the net debt-to-operating revenue ratio) and one related to budgetary flexibility (the share of revenue dedicated to debt interest payments). While the FAO projects that all three fiscal sustainability indicators will deteriorate over the outlook, only the net debt-to-operating revenue ratio is expected to exceed the Province’s target by 2029-30.
The FAO’s economic and budget outlook was finalized based on existing trade policies as of August 5, 2025. As US trade policy continues to shift, the actual impact of tariffs on Ontario’s economy is highly uncertain and will depend on the magnitude, breadth and duration of tariff coverage, as well as how businesses, households and economies respond. Given this uncertainty, the FAO developed two scenarios to estimate a range of potential economic and budget impacts to Ontario. In the FAO’s “low impact” scenario, US tariff policies are assumed to be more favourable compared to the tariff policies as of August 5, and Ontario’s budget deficit improves to $3.9 billion in 2029-30. In contrast, the FAO’s “high impact” scenario assumes US tariffs are more severe, and Ontario’s budget deficit reaches $13.4 billion by 2029-30.
To learn more, read the full report here.
Quick Facts:
- Ontario’s real GDP growth is projected to be lower than Canada’s real GDP growth in 2025 and 2026. Uncertainty in trade relations is expected to disproportionately impact Ontario, where sectors subject to US tariffs make up a larger share of the economy than in most other provinces.
- The FAO estimates that the impact of US tariffs on Ontario’s economic growth will lower provincial revenues by a cumulative $11.1 billion from 2025-26 to 2029-30.
- In the 2025 Ontario Budget, the Province projected a balanced budget in 2027-28. Based on the FAO’s outlook for the Ontario economy, and current government policies and announced commitments, the FAO does not expect that the Province will return to a balanced budget by 2027-28 without additional measures to reduce spending and/or increase revenue.
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 l 416 931 5498 l SZhu@fao-on.org l fao-on.org