FAO RELEASES ECONOMIC AND BUDGET OUTLOOK REPORT
TORONTO, May 15, 2024 – Today, the Financial Accountability Office of Ontario (FAO) released its outlook for Ontario’s economy and the Province’s finances over the 2023-24 to 2028-29 period, based on current and announced government policies.
Ontario’s real GDP growth slowed sharply to 1.2 per cent in 2023 and is projected to remain slow at 1.1 per cent in 2024, reflecting the ongoing impact of higher interest rates on household spending and business investment. As inflation cools and interest rates decline over the outlook, Ontario’s economic growth is projected to improve over the 2025 to 2028 period.
The FAO projects a $0.9 billion budget deficit in 2023-24, smaller than the government’s $3.0 billion deficit projected in the 2024 Ontario Budget. Ontario’s budget deficit is expected to widen to $6.4 billion in 2024-25 and gradually improve over the outlook, reaching a surplus of $1.8 billion by 2028-29, two years later than the government’s plan for a budget surplus.
Over the outlook, the FAO expects that the pace of growth in both revenues and spending will slow compared to recent years. Following strong growth of 7.3 per cent per year during the COVID-19 pandemic, revenues are expected to align more closely to economic growth and rise by an average annual rate of 3.8 per cent from 2022-23 to 2028-29. Based on current government policies and announced commitments, spending growth is expected to moderate to an average of 3.1 per cent per year over the same period, after recording average annual growth of 5.6 per cent over the previous six years.
To learn more, read the full report here.
Quick Facts:
- The FAO projects $1.0 billion less revenue in 2023-24 compared to the government’s revenue projection in the 2024 Ontario Budget and $3.9 billion lower by 2026-27.
- From 2023-24 to 2026-27, the government’s spending plan in the 2024 Ontario Budget is similar to the FAO’s projection, with the largest difference in 2023-24, where the government’s spending forecast is $3.0 billion above the FAO’s projection.
- The Province’s debt burden, as measured by the net debt-to-GDP ratio, is expected to fall from 38.2 per cent in 2022-23 to 36.6 per cent by 2028-29. Over the projection, the net debt-to-GDP ratio is expected to remain below the government’s target in the 2024 Ontario Budget of 40.0 per cent but above the 30-year historical average of 33.2 per cent.
- The Province’s interest on debt-to-revenue ratio, a measure of budget flexibility, is projected to rise from 6.4 per cent in 2022-23 to 6.7 per cent by 2028-29. Over the projection, the interest on debt-to-revenue ratio is expected to remain below the government’s target in the 2024 Ontario Budget of 7.5 per cent and below the 30-year historical average of 10.6 per cent.
About the FAO:
Established by the Financial Accountability Officer Act, 2013, the Financial Accountability Office of Ontario (FAO) provides independent analysis on the state of the Province’s finances, trends in the provincial economy and related matters important to the Legislative Assembly of Ontario.
Visit our website or follow us on X and LinkedIn for more information on our reports.
-30-
For further information, please contact:
Sophia Zhu | 416 931 5498 | SZhu@fao-on.org | fao-on.org
