TORONTO, September 16, 2026 – Today, the Financial Accountability Office of Ontario (FAO) released its outlook for Ontario’s economy and finances over the 2025-26 to 2030-31 period.
Ontario’s real Gross Domestic Product (GDP) growth, the broadest measure of economic activity, is projected to slow from 1.3 per cent in 2025 to 0.6 per cent in 2026 as a weak start to the year, a decline in Ontario’s population, US tariffs and elevated oil prices weigh on economic activity. Real GDP growth is projected to improve to 1.5 per cent in 2027 as population growth partly recovers, energy prices moderate and Ontario’s economy continues to adjust to the impact of US tariffs. Over the 2028 to 2031 period, real GDP growth is projected to average 1.9 per cent, close to its long-term trend.
The FAO projects that Ontario’s budget deficit increased to $10.6 billion in 2025-26, up from a deficit of $1.1 billion in 2024-25. Based on the FAO’s outlook for the Ontario economy, and current government policies and announced commitments, the FAO projects that the budget deficit will deteriorate further to $16.9 billion in 2026-27, as a projected spending increase of $10.4 billion outpaces a projected increase in revenue of $4.1 billion. The budget deficit is expected to improve over the rest of the outlook, reaching a deficit of $8.4 billion by 2030-31, as projected annual revenue growth exceeds projected spending growth.
The FAO projects that the Province’s net debt will rise from $427.1 billion in 2024-25 to $596.1 billion in 2030-31, an increase of $169.1 billion (39.6 per cent). This increase is due to $62.5 billion in accumulated budget deficits over the outlook and borrowing to finance a $119.8 billion increase in non-financial assets (largely infrastructure assets owned by the Province), offset by a $13.3 billion accounting change to remove non-financial liabilities from the calculation of net debt.
The Province has targets for three fiscal sustainability indicators, two related to the debt burden (a net debt-to-GDP ratio below 40.0 per cent and a net debt-to-revenue ratio below 200 per cent) and one related to budgetary flexibility (an interest-to-revenue ratio below 7.5 per cent). The FAO projects that all three fiscal sustainability indicators will deteriorate over the outlook. By 2030-31, the net debt-to-GDP ratio is expected to remain below the government’s target but exceed the ratio’s 10-year historical average, while the net debt-to-revenue and interest-to-revenue ratios are projected to exceed the government’s targets and each ratio’s 10-year historical average.
There are numerous risks and uncertainties that could materially impact the FAO’s economic and budget outlook over the projection period, including ongoing geopolitical conflicts and evolving Canada-US trade relations. Given this uncertainty, the FAO developed two alternative economic scenarios, a “high growth” and a “low growth” scenario, based on different assumptions for key economic variables. Under the high growth scenario, the FAO projects a budget deficit of $2.1 billion by 2030-31, while under the low growth scenario the budget deficit reaches $13.7 billion in 2030-31.
To learn more, read the full report here.
Quick Facts:
- Compared to the government’s economic outlook in the 2026 Ontario Budget, the FAO’s projection for real GDP growth is lower in all years, with the largest gap in 2026 due to more current data that indicate a modest technical recession from the fourth quarter of 2025 to the first quarter of 2026, as well as the impact of the war in Iran on energy prices and supply chains.
- Revenue growth is expected to average 2.8 per cent per year over the six-year outlook, below the 6.5 per cent average annual increase recorded during the previous six years, reflecting a slower pace of economic growth.
- Spending growth is expected to average 3.2 per cent per year over the six-year outlook, below the 5.8 per cent average annual increase recorded over the previous six years, due to slower projected inflation, slower wage and population growth, and the FAO’s analysis of current government policies and announced commitments.
- In the 2026 Ontario Budget, the Province projected budget deficits in 2026-27 and 2027-28, with a plan to return to balance in 2028-29. 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 2028-29 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.
Visit our website or follow us on X and LinkedIn for more information on our reports.
-30-
For further information, please contact:
Sophia Zhu | 416 931 5498 | SZhu@fao-on.org l fao-on.org