Ontario’s 2025 Fall Economic Statement: little new spending, slightly lower deficits
It was a tall order for the Carney government to deliver a federal budget that featured growth-driving investments while maintaining some semblance of fiscal responsibility—see our blog on Budget 2025 for a full summary and analysis. The federal budget posted significantly higher deficits and proposed measures that bet big on the private sector making major investments amid widespread geopolitical uncertainty. It is a very big gamble that may yet fail. But Ontario’s Conservative government surely empathizes with the Liberals’ tax-and-spend highwire act. While every province has felt the pain of Trump’s tariffs, few have grappled with the existential economic threats facing Ontario, where punishing levies risk the very existence of key industries ranging from steel to auto manufacturing. Even in the face of these challenges, the province tabled a 2025 Fall Economic Statement with some relatively positive fiscal news.
Unlike at the federal level, Ontario is at least on a path to a balanced budget, which is currently forecast for 2027-28. Deficits are projected to come in lower than expected at $13.5 billion for 2025–26—this year’s provincial budget had forecast a deficit of $14.6 billion—$7.8 billion for 2026–27 and a surplus of $0.2 billion in 2027–28. The province’s net debt-to-GDP is pegged at 37.7 per cent for 2025–26, down from the 37.9 per cent projected in this year’s provincial budget.
Less sunny is the real GDP growth outlook, which is set to decline to 0.8 per cent in 2025 from 1.4 per cent last year, before rising slightly to 0.9 per cent in 2026. GDP growth is expected to then increase to 1.8 per cent in 2027 and 1.9 per cent in 2028. Another source of fiscal anxiety is the province’s net debt, which continues to surge and is estimated at $458.62 billion for the current fiscal year, up from $427 billion in 2024-25. Unemployment is also expected to spike to 7.8 per cent this year, up nearly a full percentage point.
How Ontario’s debt burden will be reduced in future remains anyone’s guess. And should the Trump administration win a case before the U.S. Supreme Court (or simply tap other legislation) to continue levying tariffs at will, who knows what might be in store for the province’s damaged economy?
Leading into the tabling of the 2025 Fall Economic Statement, Finance Minister Peter Bethlenfalvy was critical of Ottawa’s budget for not going far enough to kick-start economic productivity, deliver personal and corporate tax relief or introduce spending to help soothe the business community’s frayed nerves. Yet his own plan was notably short on growth-driving measures. In fact, it was mostly a 2025 highlight package with only a few new announcements.
Some of the highlights include:
- A plan to develop a multi-year ‘Tax Action Plan’ to make Ontario more tax competitive. No specifics were provided. An update is promised in the 2026 Ontario budget
- An additional $100 million for the Ontario Together Trade Fund (OTTF) to support small and medium-sized businesses impacted by U.S. tariffs, for a total of $150 million in program spending over three years, beginning in 2025-26
- Previously announced plans to rebate the full provincial portion of the HST for first-time home buyers purchasing new or substantially renovated homes valued at up to $1 million
- A rollout of the second and third streams of the Protect Ontario Financing Program, which will see an additional $4 billion in funding flow to Ontario-based steel, aluminum, copper and auto sector businesses directly impacted by higher tariff rates
- A previously announced temporary increase of the Ontario Made Manufacturing Investment Tax Credit (OMMITC) rate to 15 per cent from 10 per cent, along with a proposal to “… expand access to the tax credit as a 15 per cent non-refundable version to corporations that are not Canadian-controlled private corporations (CCPCs).” To provide greater flexibility to businesses, the government is also proposing to amend the OMMITC eligibility criteria for investments in machinery and equipment
- A previously announced plan to spend $1.1 billion over three years to expand provincial home care services
In the end, the 2025 Fall Economic Statement committed to almost no new spending beyond what was already earmarked in the earlier provincial budget. A worsening labour picture, uncertainty over ongoing Canada-U.S. trade tensions and lacklustre growth projections clearly gave the Ford government pause. Even the premier’s vaunted 401 tunnel failed to attract any funding.
In that sense, the statement is notable as much for what it didn’t promise as what it did. Queen’s Park’s very conservative fiscal approach alludes to the fact that hard times could still be ahead—and the government wants to have the fiscal capacity to respond if a certain mercurial president continues to target its key industries.
Armando Iannuzzi, Co-Managing Partner
For more information on measures announced in Ontario’s 2025 Fall Economic Statement, contact a member of the KRP LLP team today.
