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Ontario budget

Ontario: Budget 2024 - Spending Pressures Delay Plans to Balance by One More Year

March 26, 2024
Marc Desormeaux
Principal Economist

The province of Ontario’s fiscal year 2024–25 (FY2025) forecasts a return to budget surplus in FY2027—one year later than anticipated in the 2023 Fall Economic Statement (FES).

Higher spending projections—largely attributable to public sector wage increases following the repeal of Bill 124—were responsible for much of the deterioration in the bottom line. The federal government’s announcement that it will cap international student permit applications for two years also played a role. The extension of gas and fuel tax cuts headlined new policy.

Borrowing requirements are now expected to total $38.2B in FY2025, $37.7B in FY2026, and $32.8B in FY2027. The projections for the first two years represent a combined rise of just $1.6B versus FES forecasts, as pre-borrowing activity and more short-term financing are expected to partially offset the effects of larger deficits.

Risks to the plan include weaker-than-anticipated headcount gains following Ottawa’s move to reduce the temporary resident population and further tax base adjustments. Fortunately, Budget 2024 also (characteristically) includes multiple layers of prudence.

Budget 2024 shows a deterioration in Ontario’s financial position, but that deterioration likely would have been worse absent prudent choices in prior plans. Nonetheless, the road ahead will be challenging as the province seeks to balance expenditure control and debt sustainability with the needs of a fast-growing and rapidly aging population.

NOTE TO READERS: The letters k, M and B are used in texts, graphs and tables to refer to thousands, millions and billions respectively. IMPORTANT: This document is based on public information and may under no circumstances be used or construed as a commitment by Desjardins Group. While the information provided has been determined on the basis of data obtained from sources that are deemed to be reliable, Desjardins Group in no way warrants that the information is accurate or complete. The document is provided solely for information purposes and does not constitute an offer or solicitation for purchase or sale. Desjardins Group takes no responsibility for the consequences of any decision whatsoever made on the basis of the data contained herein and does not hereby undertake to provide any advice, notably in the area of investment services. Data on prices and margins is provided for information purposes and may be modified at any time based on such factors as market conditions. The past performances and projections expressed herein are no guarantee of future performance. Unless otherwise indicated, the opinions and forecasts contained herein are those of the document’s authors and do not represent the opinions of any other person or the official position of Desjardins Group.