Ontario fall economic update raises deficit to $16.9 billion

Ontario’s fall economic update projects deeper deficits and a slower return to balance as the Ford government bets on business investment incentives and industrial support to help the province withstand U.S. tariffs.

Finance Minister Peter Bethlenfalvy’s October 29 statement raises the projected 2026–27 deficit to $16.9 billion from $13.8 billion in the spring budget. A balanced budget is now forecast for 2029–30, another year later than previously planned.

The government is emphasizing investment and economic resilience as trade disruptions weaken Ontario’s growth outlook. Opposition parties argue the plan offers too little help to households, while TD Economics questions the spending restraint underpinning the eventual return to balance.

A weaker fiscal outlook

The updated fiscal plan projects deficits of $12.7 billion in 2027–28 and $6.7 billion in 2028–29 before a $200-million surplus in 2029–30. Together, the first three years represent a $16.9-billion deterioration from the spring forecasts.

Real economic growth is now projected at 0.5 per cent in 2026, half the spring forecast, followed by 1.5 per cent in 2027. The government expects growth to recover to 1.8 per cent in 2028 and two per cent in 2029.

Despite slower economic growth, revenue is forecast to exceed the spring projection by $2 billion this fiscal year, but higher expenses and a larger reserve more than offset that improvement.

The government has added $3.8 billion to its contingency fund to provide flexibility against economic risks and spending pressures. Interest and other debt-servicing charges are projected to rise from $17.4 billion this fiscal year to $20.4 billion in 2028–29.

Investment incentives anchor the response

The Ontario Competitiveness Tax Cut would provide $8 billion in provincial tax relief over five years by paralleling Ottawa’s Productivity Mega Deduction, allowing businesses to immediately write off a wider range of capital investments.

The province estimates the measure could attract at least $11 billion in additional investment, create 30,000 jobs and add $6 billion to GDP. Those figures are government projections, rather than investments or jobs already secured.

The update also proposes more than $50 million in additional research-and-development tax support over three years by restoring eligible capital expenditures under provincial tax credits.

Alongside those incentives, the government highlights the previously announced $8.7-billion Canada–Ontario industrial action plan for steel, automotive manufacturing and critical minerals. That package combines commitments across different programs and years; it is not all new spending announced in the fall statement.

Ontario is also maintaining its $210-billion, 10-year capital plan, including highways, transit, hospitals and schools.

TD questions the path to balance

In analysis released October 29, TD economist Rishi Sondhi describes a weaker fiscal trajectory while judging Ontario’s debt burden and interest costs manageable so far.

TD sees potential revenue upside because its forecasts for nominal economic growth exceed the province’s. The bank also notes that a substantial part of this year’s spending revision reflects the contingency-fund increase.

The harder question is whether spending restraint can last.

Achieving balance, Sondhi writes, relies on holding program-spending growth to “rates not sustainably seen in nearly 15 years.”

TD says investment deductions could stimulate capital spending at the cost of forgone revenue, while infrastructure investment could support productivity over time. But persistent deficits leave Ontario with less room to absorb another economic shock.

Opposition challenges the affordability plan

NDP Leader Marit Stiles called the statement “an admission of failure,” arguing that the government had failed to address rising household costs.

Finance critic Jessica Bell challenged the results of government spending: “Never has a government spent so much while delivering so little.”

Ahead of the update, Green Leader Mike Schreiner had advocated taxing extreme wealth to finance housing, health care, education and Ontario-made energy and manufacturing. In an interview with Energi Media before the statement, he connected that proposal to electrification and economic competitiveness.

The fiscal plan now rests on investment incentives delivering stronger growth while spending restraint accommodates public-service needs. Its success will be measured in business investment, employment and services delivered as Ontario absorbs the continuing trade shock.