Ontario's Deficit Balloons to $16.9 Billion as Trade War Slows Growth

Ontario now expects to run a $16.9-billion deficit in 2026–27, up from the $13.8 billion it projected in the spring budget. That is the headline number in the fall economic statement Finance Minister Peter Bethlenfalvy tabled at Queen's Park last week.

The government's own documents show the red ink lasting for several more years. The statement projects deficits of $12.7 billion in 2027–28 and $6.7 billion in 2028–29, followed by a small surplus of $0.2 billion in 2029–30. The Globe and Mail noted that the province had previously forecast a $600-million surplus for 2028–29, and called the new plan the fourth delay to a balanced budget since 2024.

Why the numbers got worse

The province blames slower growth tied to U.S. trade actions and higher energy prices. Its news release says Ontario now expects real GDP growth of 0.5 per cent in 2026 and 1.5 per cent in 2027. The Globe reported that the growth forecast had been roughly halved and that additional U.S. tariffs could take effect as soon as Jan. 1.

There is some better news for the year that just ended. The final 2025–26 result was a deficit of $13.0 billion, smaller than the $14.6 billion the province had forecast.

CBC News reported that the government also raised its contingency fund by $3.8 billion, to $4.9 billion, giving itself more room to respond if conditions get worse. CBC described the 2026–27 shortfall as the largest Ontario deficit in almost two decades.

Debt and interest

Interest on the debt is now one of the province's biggest bills. The statement puts interest costs at $17.4 billion this year. The province's net debt-to-GDP ratio is projected at 37.4 per cent, below the government's target ceiling of 40 per cent.

Bethlenfalvy defended the approach. He told reporters he was a "realist" about the economic outlook given the pressure from U.S. trade actions.

What's in the plan

The government has titled the update "A Plan to Protect Ontario". Its release lists several measures:

• More than $90 million for the forest sector and more than $86 million to support biomass, aimed at mills and northern communities hit by U.S. softwood duties.
• What the government describes as $12.5 billion in affordability supports for households.
• Changes to eligibility for Ontario's film and television tax credits.
• Public pre-budget consultations beginning in November ahead of the 2027 budget.

The political picture

The deficit numbers give opposition parties a fresh line of attack. Premier Doug Ford's government points to the trade war and energy prices, which are largely beyond its control.

For Toronto readers, the statement matters beyond the totals. Queen's Park recently signed a new funding arrangement with the City of Toronto, and municipal budgets depend on provincial transfers. A thinner provincial cushion could make future negotiations over transit, housing and shelter funding harder.

The next major test comes with the spring 2027 budget. Ontarians can weigh in through the pre-budget consultations, which the province says start this month. The full fall statement, including the fiscal tables, is posted on the Ontario budget website.