A Special To the Point for Thursday, November 6, 2025

Ontario’s fall economic statement paints a cautious picture: slower growth, rising debt, and a fiscal plan held together by optimism and restraint. The government says balance is coming — the numbers suggest it’s going to be close.

2025 ONTARIO FALL ECONOMIC OUTLOOK AND FISCAL REVIEW

Fragile, Fixable, and Dependent on Luck

Ontario’s 2025 Fall Economic Statement reads like a study in controlled turbulence, a government steering through global headwinds, domestic weakness, and its own political limits. The economy is slowing. The deficit is narrowing on paper. Debt keeps climbing. The Ford government insists it can balance the books by 2027–28, but that claim rests on optimism, restraint, and a fair bit of luck.

Ontario’s economy is stuck in low gear. Growth barely clears one per cent over the next two years, the weakest stretch since the financial crisis. The culprit is no mystery: U.S. tariffs are choking exports and freezing investment. For a manufacturing-heavy province tied to American supply chains, that is more than a policy problem; it is a structural one.

The labour market is softening too. Unemployment is expected to hit 7.8 per cent next year, up from seven per cent in 2024. Job creation is stalling. Employment growth of less than one per cent means population gains will continue to outpace the economy. That translates into weaker output per person, slower wage gains, and households stretched by inflation and debt. Businesses are cautious, consumers are nervous, and spending is slowing to a crawl.

The province now projects a $13.5 billion deficit for 2025–26, slightly better than the spring forecast. It falls to $7.8 billion the following year, then a wafer-thin $200 million surplus by 2027–28. Encouraging, on paper. But the math is fragile. The plan assumes tax revenue will grow by roughly five per cent a year while the economy expands at barely half that pace. Program spending, meanwhile, is supposed to rise less than one per cent annually. That means real per-capita cuts once you account for inflation and population growth. Those are tough to sustain with hospital backlogs, teacher talks, and aging infrastructure. The contingency reserve is almost gone. One weak quarter or unplanned expense could wipe out the surplus before it arrives.

Debt is still manageable but moving in the wrong direction. Net debt will top $500 billion by 2027–28, up from $408 billion just four years earlier. The debt-to-GDP ratio remains below the 40 per cent target for now, though the Financial Accountability Office expects it to creep above that by the end of the decade. Interest costs are stable thanks to earlier long-term borrowing, but that cushion will fade if deficits persist. Ontario is not facing a crisis yet, but the trajectory cannot continue forever.

The government is betting on growth measures to turn things around: a richer manufacturing tax credit, a housing rebate for first-time buyers, and a ten-year, $200 billion infrastructure plan. They make sense in principle. Counter-cyclical spending can cushion a slowdown. The challenge is execution. Ontario’s long-standing productivity problem remains unresolved. Businesses still invest less than peers, regulatory delays still choke projects, and innovation spending still trails other provinces. Tax tweaks and red tape reduction help, but they will not close the productivity gap. Without stronger output per worker, the province cannot raise living standards or build the revenue base it needs for fiscal stability.

The housing measures will help some buyers but could inflate demand faster than supply, especially as immigration slows and construction labour stays tight. Infrastructure spending could pay off eventually if it delivers real efficiency gains instead of just ribbon-cuttings.

Trade is the biggest blind spot. The forecast assumes current tariffs hold steady, with no escalation or breakthrough. Maybe they will. But if Washington doubles down or backs off, the entire outlook changes overnight. Population dynamics also deserve more attention. Slower immigration will cool GDP growth and reduce the tax base. That shift is not clearly built into the government’s assumptions. And household debt looms large in the background. Mortgage renewals at higher rates are squeezing families, insolvencies are rising, and a soft job market could deepen the drag. Climate and transition risks barely appear in the statement at all, even as extreme weather, clean energy mandates, and auto-sector transformation reshape provincial finances.

Ontario’s fiscal position is precarious but not dire. Balance is achievable if growth steadies and spending stays disciplined. What is missing is a clear productivity strategy that turns big infrastructure dollars into measurable gains, speeds up housing approvals, and pulls private capital off the sidelines. Without that, Ontario will keep paying more to get less: slower growth, thinner surpluses, and a rising debt load.

For now, Queen’s Park’s plan to “protect Ontario” depends on conditions it cannot control: U.S. trade policy, global demand, and central bank timing. Within its control, the government is taking some steps in the right direction, just not at the scale or speed required to change the story. The balance sheet can survive that for a while. The politics of it might not.

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