Ontario Deficit to Shrink Despite Trade Turmoil, Slow Growth

08bbzil}qa6}0ljsq]b51zl3_media_dl_1.png Ontario Ministry of Finance

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(Bloomberg) — Ontario’s budget shortfall is forecast to improve on stronger tax revenues, though the trade war with the US is keeping the government cautious on its economic growth predictions.

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The government’s deficit is expected to be C$13.5 billion ($9.6 billion) in the fiscal year ending March 31, down from the C$14.6 billion projected in May. The government still expects to slash that figure to C$7.8 billion the following year, it said in a fiscal update released Thursday.

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The province’s finance department doesn’t project a balanced budget until the 2027-2028 fiscal year, when it’s forecasting a C$200 million surplus.

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Ontario produces more than 38% of Canada’s gross domestic product and is home to sizable automotive and steel producers, which have been battered by US tariffs. The province continues to expect 0.8% growth for 2025 and trimmed its predictions by 0.1 percentage point for the next two years.

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Those projections are slightly below the average of private-sector forecasts.

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The government “erred on the side of caution in its fall fiscal outlook, baking material prudence into its baseline economic and revenue projections. This suggests to me that the risks to the forecast for government finances are likely skewed to the upside,” Randall Bartlett, deputy chief economist with Desjardins Group, said in an interview.

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Ontario sees revenues rising to C$223.1 billion — C$3.2 billion higher than forecast in May — driven by stronger taxation and public-sector revenue. 

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The province also plans to grow its spending to C$234.6 billion, C$2.1 billion more than estimated in May. At least C$5 billion of that will go toward supporting workers impacted by US President Donald Trump’s tariffs, as previously announced.

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“The government is stepping up to protect Ontario in response to US-imposed tariffs by deploying immediate strategies to boost investment attraction and strength the province’s supply chains for long-term growth,” Ontario Finance Minister Peter Bethlenfalvy said in a statement.

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The economic update also reiterated that the province is building small modular reactors alongside the federal government and developing the critical mineral-rich Ring of Fire in northern Ontario.

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