By Fergal Smith
TORONTO (Reuters) -Ontario, whose manufacturing-linked economy has been badly hurt by trade uncertainty, forecast a slightly narrower fiscal deficit than previously expected and said it would increase support for first-time home buyers, a fiscal update showed on Thursday.
Canada’s most populous province projected a deficit of C$13.5 billion ($9.63 billion) for the 2025-26 fiscal year that began in April. That’s down from a C$14.6 billion deficit forecast in a May budget, helped by higher tax revenue, but far wider than the 2024-25 deficit of C$1.1 billion.
A deficit is also expected in the 2026-27 period, of C$7.8 billion, before a shift into a modest surplus over the 2027-28 fiscal year. A C$2 billion reserve is set aside in each fiscal year, while a topped-up contingency fund has a projected balance of C$4.5 billion.
Ontario sends more than three-quarters of its exports to the United States, including autos, steel and aluminum, which are facing hefty U.S. duties. Its premier, Doug Ford, has outraged U.S. President Donald Trump with a recent TV ad featuring former President Ronald Reagan’s condemnation of protectionism.
“With tariffs taking direct aim at Ontario workers and communities, it has never been more important for the government to deliver on its plans to protect Ontario,” Ontario Finance Minister Peter Bethlenfalvy said in a statement.
Economic growth was forecast to slow to 0.8% this year, matching May’s projection, from 1.4% in 2024 before picking up slightly to 0.9% in 2026.
Measures the province is planning include rebating the full 8% provincial portion of a sales tax for first-time home buyers on qualifying new homes, investing an additional C$100 million in a fund to help small and medium-sized businesses diversify into new markets and temporarily increasing the rate of a manufacturing investment tax credit.
In May, Ontario set aside a C$5 billion emergency backstop for businesses facing significant tariff-related disruptions.
The province, one of the world’s largest sub-sovereign borrowers, projected a net debt-to-GDP ratio of 37.7% in 2025-26 after it fell to a 13-year low of 36.2% in the previous fiscal year. Total long-term borrowing was expected to decline to C$42.5 billion from C$49.5 billion in 2024-25.
($1 = 1.4024 Canadian dollars)
(Reporting by Fergal Smith, editing by Deepa Babington)
Comments