The Ontario government says its fiscal position continues to strengthen, even as global economic uncertainty weighs on growth prospects, according to the province’s 2025–26 Third Quarter Finances released Tuesday.
The update, issued by the Ministry of Finance, provides a snapshot of Ontario’s economic and fiscal outlook since the release of the 2025 Ontario Economic Outlook and Fiscal Review, also known as the Fall Economic Statement. It points to improving revenues, a declining net debt burden relative to the size of the economy and what the government characterizes as continued progress on a “responsible path to balance.”
“Despite global economic uncertainty, the results reflect the government’s responsible path to balance while continuing to make strategic investments to protect workers, support growth and keep costs down for families,” the province said in the release.
Finance Minister Peter Bethlenfalvy said Ontario’s balance sheet is in its strongest shape in more than a decade, positioning the province to respond to economic shocks while continuing to invest in growth. “Our government’s prudent fiscal plan is more important than ever, and it’s working. Ontario’s finances are in the strongest position they have been in over a decade,” Bethlenfalvy said. “Having a strong balance sheet will allow us to act quickly to protect our workers and communities while making investments in strategic priorities to unleash our economy and make Ontario the most competitive place in the G7 to invest, create jobs and do business.”
The third-quarter update shows Ontario’s real gross domestic product increased by 0.5 per cent in the third calendar quarter of 2025, supported by gains in net trade. For the full year, real GDP is estimated to have risen by 1.2 per cent, exceeding expectations set out in the Fall Economic Statement.
That growth, combined with improved fiscal results, has helped reduce the province’s net debt-to-GDP ratio. The government now projects the ratio will decline to 36.9 per cent, down 0.8 percentage points from earlier forecasts. The Ministry of Finance said both the stronger GDP performance and lower debt burden highlight Ontario’s economic resilience, particularly in the face of U.S. tariffs that have weighed on trade-sensitive sectors.
On the fiscal side, Ontario’s 2025–26 deficit is now projected at $13.4 billion. While still substantial, the shortfall reflects an improvement in revenues compared with earlier estimates. Total revenues for the fiscal year are now forecast at $223.7 billion, an increase of $0.6 billion from expectations outlined in the Fall Economic Statement and $3.8 billion higher than projected in the 2025 Ontario Budget.
Program spending, however, is also trending higher. Program expenses for 2025–26 are projected at $219.9 billion, up $3.6 billion from the forecast in the 2025 Budget and $1.5 billion higher than the estimate in the Fall Economic Statement. The government did not detail specific drivers behind the increase in program spending in the release but reiterated its focus on protecting workers and supporting economic growth.
Interest and debt servicing costs remain unchanged from earlier forecasts. The province expects to spend $16.2 billion on interest and debt servicing in 2025–26, consistent with projections in both the 2025 Budget and the Fall Economic Statement. Ontario’s average cost of borrowing for the fiscal year remains at 4.0 per cent.
The update also reflects a partial drawdown of the province’s fiscal reserve. The 2025 Budget included a $2.0 billion reserve for 2025–26 to protect against unforeseen changes in revenue or expenses. As part of the third-quarter outlook, that reserve has been reduced to $1.0 billion.
Taken together, the figures suggest a fiscal picture that is improving at the margins but still vulnerable to economic headwinds, including global trade tensions and slower growth in key export markets. The government has framed its approach as one of cautious optimism, emphasizing discipline while maintaining room to respond to shocks.
Ontario’s next fiscal update will come with the release of the 2026 Budget, scheduled by March 31, 2026.
