Ontario: Budget 2026–27

Highlights

• Ontario’s Budget 2026 projects a prolonged path to balance despite near-term improvement. The 2025–26 fiscal year (FY2026) deficit projection has been reduced to $12.3B (1.0% of nominal GDP) but is expected to widen to $13.8B (1.1%) in FY2027 as higher spending takes hold, delaying the return to budget surplus to FY2029 (graph 1). Table 1 summarizes key fiscal indicators.
• Despite a weaker bottom line, Ontario’s net‑debt‑to‑GDP path remains largely intact. Stronger nominal GDP lowered the FY2026 starting point to 36.8% (vs. 37.7% in the Fall Economic Statement), though the ratio rises over the outlook and reconverges with the prior path at 38.2% by FY2029.
• The revenue outlook benefits from a stronger-than-expected handoff and firmer near-term growth, allowing higher revenue projections despite more conservative assumptions in the outer years.
• New policy measures remain targeted. The government delivered on its Tax Action Plan through several material measures, most notably expanding the elimination of the full Harmonized Sales Tax (HST) to all eligible buyers of new homes. Program spending increases are largely driven by health‑care cost pressures, absent of a broader fiscal expansion, keeping Ontario relatively restrained compared with peers.
• FY2026 borrowing requirements were raised significantly relative to the FES ($58.6B vs $42.5B), reflecting pre‑funding activity and advance borrowing associated with the launch of the $4B Protect Ontario Account. Borrowing requirements are expected to reach $47.2B in FY2027, $43.1B in FY2028, and $42.7B in FY2029.
• The budget strikes a balance between spending and consolidation, setting out a well‑anchored plan to meet growing healthcare demand and deliver growth‑supportive relief without adding to province’s debt burden.