A new outlook report from the Financial Accountability Office of Ontario (FAO) projects the province’s deficit and debt will grow significantly over the next five years.
The report from Ontario’s financial watchdog, which was released on Wednesday, looks at the province’s economic outlook and finances from 2024-25 to 2029-30.
“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 $12.0 billion in 2025-26,” the report states.
The financial watchdog also said the province’s net debt will increase to around $141.4 billion (34.7 per cent), from $408.0 billion in 2023-24 to $549.3 billion in 2029-30.
“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,” the report states.
When the Ontario government tabled its budget back in May, the province laid out a path to balance the budget by 2027-28. However, the FAO said that is not going to happen.
“In three years, the government is forecasting a balanced budget. We think it, based on our review, it’s closer to a deficit of $10 billion, so to achieve that $10-billion gap, it’s either revenue measures or spending changes that equal $10 billion,” said Jeffrey Novak, the Financial Accountability Officer.
The difference, Novak said, is because the government will be forced to spend a lot more than it’s forecasting on critical programs like health care.
In a statement to CityNews, a spokesperson from Finance Minister Peter Bethlenfalvy’s office said the province’s finances are stronger today than they have been over a decade.
“As is always the case, FAO reports reflect a moment in time and do not encompass the entirety of the province’s finances. Total, up-to-date, and accurate expenditures will be made available when the Public Accounts are tabled,” the statement reads.
“As highlighted in the 2025 Budget, we remain on a clear path to balance by 2027-28, as we work to protect our economy and make Ontario the most competitive place to do business in the entire G7.”
The FAO said it finalized its economic and budget outlook based on existing trade policies as of Aug. 5, 2025.
With the current trade climate, the financial watchdog says Ontario’s real GDP growth is projected to slow to 0.9 per cent in 2025 and 1.0 per cent in 2026, due to the U.S. tariffs reducing demand for Ontario’s exports and hiring cuts.
However, as the provincial economy adjusts to the tariff impact over the course of the FAO’s outlook period, it projects GDP growth will return to its average long-term trend of 1.9 per cent per year.
“As U.S. 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.”
Due to the trade uncertainty, the FAO said it came up with two scenarios to estimate a range of potential economic and budget impacts to the province.
In the ‘low impact’ scenario, in which U.S. tariff policies are assumed to be more favourable compared to the tariff policies as of Aug. 5, the province’s budget deficit would improve to $3.9 billion in 2029-30.
However, in the ‘high impact scenario,’ in which U.S. tariff policies are more severe, the budget deficit would hit $13.4 billion by 2029-30.
Click here to read the full report.
With files from Mark McAllister, CityNews; and Richard Southern, 680 NewsRadio