Ontario not currently on path to balance, financial watchdog finds

Ontario’s financial watchdog says the province is not currently on a path to balance as spending ticks up and revenue from taxation begins to fall in the face of a cost-of-living crisis.

The Financial Accountability Officer of Ontario found that the provincial government’s budget deficit will increase to $11.1 billion in the 2025-26 year, an increase from the previous year.

The annual deficit will improve to $11.18 billion in the 2026-27 year and slowly improve. While the picture will get better, the FAO found there will still be a deficit of $6.3 billion for the 2029-30 year.

Part of the issue, the watchdog suggests, is that the province’s revenue will fall far below previous years.

The average increase in revenue over the past five years has been 7.6 per cent, according to the FAO. Over the next half-decade, that will drop to an average increase of 2.6 per cent.

“The slowdown in revenue growth reflects the FAO’s expected moderation in economic activity compared to the previous five years,” the report read.

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“Revenue growth over the outlook is also constrained by declines in interest and investment income and international student tuition revenue in the colleges sector.”

2:25 Ontario deficit to explode next year, budget watchdog projects

Finance Minister Peter Bethlenfalvy released figures Tuesday projecting the 2025-26 deficit will be $13.4 billion, higher than the FAO’s suggestion.

He refused to “speculate” on the figures in the upcoming budget when asked if he was still confident Ontario was on a path to balance.

“Ontario continues to navigate a period of global economic and geopolitical uncertainty,” he told reporters. “And in spite of this uncertainty, Ontario’s economy proved to be resilient and continued to grow in 2025.”

The FAO’s report projects employment will increase, with job losses in tariff-hit industries offset by other gains.

“Annual employment growth is projected to slow to 0.3 per cent in 2026 and then improve to 0.9 per cent in 2027 as Ontario’s labour market adjusts to a new global trade environment,” the report said.

“The annual unemployment rate is projected to improve to 7.6 per cent in 2026 and continue to trend down over the remainder of the outlook.”

Ontario NDP MPP Jessica Bell said the government couldn’t hide from the overall unemployment numbers.

“No amount of spin from Minister Bethlenfalvy can hide these staggering unemployment numbers and a record-high provincial debt,” she said in a statement.

“We need a plan that brings significant investments into infrastructure and public services — from schools to hospitals — to strengthen Ontario’s economy and create good jobs.”