TORONTO, February 11, 2026 – Today, the Financial Accountability Office of Ontario (FAO) released its outlook for Ontario’s economy and finances over the 2025-26 to 2029-30 period.
Ontario’s real Gross Domestic Product (GDP) growth, the broadest measure of economic activity, slowed to an estimated 1.3 per cent in 2025, down from 1.6 per cent in 2024, as US tariffs led to a contraction in Ontario’s exports and business investment. However, despite US tariffs, Ontario’s economic growth in 2025 was supported by resilient household spending and an increase in residential investment.
Ontario’s economic growth is projected to be little changed in 2026 at 1.4 per cent as lower interest rates continue to provide some relief to households and residential investment, while business investment and exports remain subdued due to trade uncertainty. Over the 2027 to 2030 period, real GDP growth is projected to average 1.9 per cent, close to the long-term trend, supported by trade diversification.
Based on the FAO’s outlook for the Ontario economy, and current government policies and announced commitments, the FAO projects that Ontario’s budget deficit will increase to $11.1 billion in 2025-26, up from a deficit of $1.1 billion in 2024-25. The budget deficit is projected to reach $11.8 billion in 2026-27, before improving gradually over the rest of the outlook. Despite the improvement, the budget is expected to remain in deficit over the outlook, with a budget deficit of $6.3 billion projected in 2029-30.
The FAO projects that the Province’s net debt will rise from $427.1 billion in 2024-25 to $547.9 billion in 2029-30, an increase of $120.9 billion (28.3 per cent). This increase is due to $44.3 billion in accumulated budget deficits over the outlook and borrowing to finance a $76.5 billion increase in non-financial assets, largely infrastructure assets owned by the Province and the broader public sector.
The Province has three fiscal sustainability targets, two related to the debt burden (a net debt-to-GDP ratio below 40.0 per cent and a net debt-to-operating revenue ratio below 200 per cent) and one related to budgetary flexibility (the share of revenue dedicated to debt interest payments below 7.5 per cent). The FAO expects that all three fiscal sustainability indicators will deteriorate over the outlook. However, the net debt-to-GDP and the net interest-to-operating revenue ratios are projected to remain below the government’s targets and each ratio’s 10-year historical average. In contrast, the net debt-to-operating revenue ratio is expected to exceed the government’s target and its 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. Given this uncertainty, the FAO developed two alternative economic scenarios, a “high growth” and a “low growth” scenario, to produce a potential range of economic and budget outlooks for Ontario. Under the high growth scenario, the FAO projects a budget deficit of $2.3 billion by 2029-30, while under the low growth scenario the budget deficit reaches $10.1 billion in 2029-30.
To learn more, read the full report here.
Quick Facts:
- Canada’s real GDP growth is expected to continue to outpace Ontario’s growth in the near term, with an average of 1.6 per cent projected for Canada over the 2025 to 2026 period compared to 1.4 per cent for Ontario.
- Compared to the government’s economic outlook in the 2025 Ontario Economic Outlook and Fiscal Review, the FAO’s projections for both real and nominal GDP growth are higher in 2025 and 2026 based on more current economic data that indicate stronger labour income, corporate profits and household consumption.
- Revenue growth is expected to average 2.6 per cent per year over the five-year outlook, below the 7.6 per cent average annual increase recorded during the previous five years, reflecting a slower pace of economic growth.
- Spending growth is expected to average 3.0 per cent per year over the five-year outlook, below the 6.5 per cent average annual increase recorded over the previous five 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 2025 Ontario Economic Outlook and Fiscal Review, 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