TORONTO — Staring down a deficit $10 billion bigger than previously planned, Ontario is betting on industry and interprovincial trade to weather the storm.
The province is predicting a $6 billion deficit for the 2024-25 fiscal year, which closed at the end of March, according to the Ford government’s 2025 budget.
Largely due to U.S. President Donald Trump’s tariffs, the deficit for the fiscal year that began in April is expected to increase to $14.6 billion — up from the $4.6 billion predicted in last year’s budget, the government said.
The deficit is expected to fall to $7.8 billion in 2026-27, followed by a small surplus of $200 million in 2027-28. Last year’s budget predicted a surplus coming one year earlier.
Uncertainty was the theme of the budget. In a slow-growth scenario, Ontario would still be in a $7.7 billion deficit by 2027-28, with no projected path to balance. In a fast-growth scenario, the province could see a $7.3 billion surplus by that year, the government projects.
Ontario’s economy will slow this fiscal year — from 1.5 per cent real GDP growth in 2024 to 0.8 per cent this year — but won’t slide into a recession, the government predicted. Projected real GDP growth is lower than in October’s fiscal statement, but will pick up in the coming years, increasing to 1.9 per cent by 2027.
The province expects inflation to hold relatively steady at 2.3 per cent this year and 2 per cent until 2029.
Ontario’s debt-to-GDP ratio is projected to stay below the government’s 40 per cent target.
If the government is trying to project stability, many are not feeling it. Small business confidence is now worse than it was in March 2020, or at any time during the COVID-19 pandemic. Consumer confidence is similarly shot, at less than half of what it was in 2014.
While employment increased by 1.7 per cent last year, the government predicts it will slow to 0.9 per cent in 2025. Population increases are expected to outpace jobs, meaning unemployment is projected to rise to 7.6 per cent this year before falling to 6.2 per cent in 2028.
While Finance Minister Peter Bethlenfalvy said he wouldn’t “speculate” on whether his government’s plan is enough to stave off a recession, he said Ontario is in “the best fiscal shape that this province has seen in close to 15, 20 years.”
Ontario will take on “good debt” for long-term infrastructure like roads and hospitals, he said.
Tariffs ruining fiscal picture: government
In his budget speech to the legislature, Bethlenfalvy focused heavily on the economic disruption of U.S. tariffs, and his government’s proposed solution: spending more on Ontario industry to prop up the economy and avoid drastic service cuts.
“Our closest ally and trading partner — our neighbour, the United States — has overturned an economic relationship we once saw as unshakeable,” said Bethlenfalvy, who noted in his speech that his wife is American and his children were raised in the States.
“Ontario and Canada are at a precipice, and we need to take serious steps to make sure we do not find ourselves anywhere near the bottom,” he said.
Those steps include billions of dollars in business supports, largely for the sectors the Ford government has championed: resource extraction, manufacturing and infrastructure.
Premier Doug Ford had already announced an $11 billion business-focused tariff relief package, including deferred tax payments, Workplace Safety and Insurance Board (WSIB) rebates and an increase to skills training.
Thursday’s budget added up to $5 billion for a new Protecting Ontario Account, which will provide "immediate liquidity relief” for tariff-hit businesses after they have exhausted all other government supports.
Bethlenfalvy didn’t explain exactly how businesses could access that fund, or what kind of strings would be attached. In a media briefing, a senior civil servant said it will act as a backstop if economic conditions worsen.
Another $5 billion will go into the province’s infrastructure bank, the Building Ontario Fund, which was announced in the last budget.
The government is putting $600 million more into the Invest Ontario Fund, which aims to attract private sector investment in the province.
Also previously announced were $3 billion for loan guarantees for Indigenous-owned entities undertaking energy projects; $500 million for a new Critical Minerals Processing Fund, aimed at speeding up and attracting new mining projects; $50 million for the Ontario Together Trade Fund, to help businesses expand interprovincial trade; a new $40 million Trade-Impacted Communities Program for municipalities hit by tariffs; and a five per cent boost to the Ontario Made Manufacturing Investment Tax Credit.
The finance minister also noted Ontario’s efforts to remove interprovincial trade barriers, an issue dear to Ford — “or Captain Canada, as I like to call him, and many others do as well,” Bethlenfalvy said.
The move could add $200 billion to Canada’s GDP, he said, though some economists have sought to temper expectations slightly on that front.
His speech delivered a heavy dose of national pride, positioning Ontario as the leader that will transform Canada into “the most competitive nation to do business in all the G7.”
“And together, we will build a stronger Ontario. We will build a stronger, sovereign and prosperous Canada,” he said.
Government to tighten belt on health, education
On health care, the budget forecasts $91.1 billion in spending this year, a two per cent increase from 2024-25’s $89.3 billion. Of the increase, $1.1 billion is a boost for the hospital sector.
In order to balance the budget by 2027-28, the government is planning to hold health-care spending increases to less than the rate of inflation, projections show.
Overall, education spending is forecast to basically flatline after a $2.6-billion boost this year, holding at about $41 billion for the next two years.
However, Bethlenfalvy said these projections were not an indication of program cuts to come.
“No. Categorically, no,” he said.
Per-pupil education funding is up by 2.6 per cent in the budget, which is 0.3 per cent higher than inflation, he said.
“And we're gonna continue to invest by hiring more teachers for our great schools,” he said, adding that his government is “investing record amounts in health care.”
Housing outlook still bleak
Ontario could remain far off its target of 1.5 million new homes by 2031 for years to come.
Budget housing start numbers show Ontario had around 74,600 housing starts in 2024 and the province is projecting just 71,800 this year. That’s less than half the approximately 150,000 new homes per year target needed to reach 1.5 million by 2031.
Bethlenfalvy said he is still committed to that goal and is “not going to relent.” He added that tariffs have impacted housing starts “a lot” in Ontario and across the world.
Housing start numbers released in the province’s fall economic statement last year showed signs that new home construction was slowing prior to tariff threats.
The government has been well off its housing target for years.
Opposition parties decry lack of housing, health funding
NDP Leader Marit Stiles said the budget offers nothing to people facing closed emergency rooms or “families wondering how they'll make ends meet this summer.”
The party called for more public infrastructure spending on hospitals, schools and affordable housing, training and apprenticeships, and worker income supports.
Liberal Leader Bonnie Crombie said she saw more in the budget on alcohol than health care.
“There's an old line that says, ‘Show me your budget, and I'll show you your values,’” she said. “Doug Ford is showing us his values.”
Green Leader Mike Schreiner said the budget “utterly fails to even attempt to address the housing affordability crisis,” adding that the government has chosen to “criminalize homelessness … even though it costs $150,000 a year to house somebody in prison, versus $25,000 a year to actually house them in a home they can afford.”
Cost overruns in certain sectors
Compared to the 2024 budget, health spending is projected to be $3.4 billion higher in 2024-25, mostly due to “compensation costs,” the government said.
Post-secondary education expenses ran $2.1 billion higher than expected due to college sector spending and student financial aid uptake.
Education spending was $732 million higher than forecast, due to “compensation costs related to labour agreements” and “higher than forecasted school board spending.”
Ontario is spending another $2.7 billion more than expected on public sector worker wage settlements after the repeal of Bill 124, a Ford government wage-restraint law that was found unconstitutional, and Indigenous land settlements. That figure is broken out separately from the health and education cost overruns.
The government is also projecting to spend $649 million more than expected on social services, mostly because of an increase in the number of asylum seekers accessing Ontario Works, it said.
Booze, AI, trains and more
Alcohol industry funding is not absent from this Ford government budget. The VQA Wine Support Program will be expanded to $420 million over the next five years, and a new $175 million Ontario Grape Support Program will aim to double the percentage of Ontario grapes in blended wine.
Venture capital funds focused on national defence and artificial intelligence will get $50 million, and those supporting life sciences and biomanufacturing companies will get $40 million, through Venture Ontario.
The Hydrogen Innovation Fund will get $30 million to support hydrogen-related energy projects.
The Ontario Automotive Modernization Program and Ontario Vehicle Innovation Network, both focused on new auto sector technology, will get $85 million to help them with tariffs.
Shortline railways — which run trains that move freight between shippers and main railways, or tourist passenger trains — will get their own boutique support: a 50 per cent refundable corporate income tax credit for track maintenance and rehabilitation between now and 2030. The government pegged the cost at $23 million.
—With files from Jessica Smith Cross, Sneh Duggal and Steve Cornwell
