Finance Minister Peter Bethlenfalvy will deliver Ontario’s 2026 budget on Thursday. Back on the normal legislated timeline following last year’s election-delayed May budget, this year’s document arrives — once again — in a climate of heightened economic uncertainty and mounting fiscal pressure.
This will be Bethlenfalvy’s sixth budget, tying Robert Nixon, Dwight Duncan, and Charles Sousa for the modern-era record. (For the Ontario politics history buffs out there, Leslie Frost is the all-time record holder, having delivered thirteen budgets between 1944 and 1958.) His tenure has spanned an unusually turbulent stretch: a pandemic-era budget in 2021, followed by rapid recovery, inflation, rising interest rates, Trump 2.0, and now a period of slowing growth in a shifting global environment.
Against that backdrop, what should we be watching for?
The fiscal plan will be a key reveal in the budget. The province’s latest update, released in February, projected a $13.4 billion deficit for 2025–26. The government’s 2025 budget plan — reaffirmed in the fall economic statement — sets out a return to balance in 2027–28, with a $7.8 billion deficit in 2026–27. This follows two years of nearly balanced budgets, with deficits so small they barely register.
That path back to balance looked tight last May. It now looks less like a path and more like a narrow ledge.
The financial accountability office offers a cautionary tale. While it projects a somewhat lower deficit of $11.1 billion in 2025–26 — largely reflecting built-in prudence — it sees a higher deficit of $11.8 billion in 2026–27 and only modest improvement thereafter, with deficits continuing through the outlook. The difference comes down largely to health-care spending: the FAO assumes continued growth in line with cost pressures, while the government is counting on restraint. Both cannot be right.
Will Ontario follow British Columbia and Alberta in revealing a weaker-than-expected fiscal outlook? Or will it look more like Quebec — largely holding the (already weak) line? If it is a worsening situation, the framing could be familiar: support for households and the economy in uncertain times. But it also would raise a more basic question. Was the earlier path back to balance more aspiration than plan?
Economic uncertainty will feature prominently. Policy volatility under U.S. president Donald Trump and broader geopolitical tensions are already shaping the outlook. The global economy is not off the rails, but it has started to rattle.
There is some good news. The economy has proven more resilient than expected, with growth in 2025 coming in a bit stronger than forecast. But conditions have softened. Recent data point to early signs of contraction in parts of the economy, with unemployment heightened, particularly among younger workers. Whether or not an economy-wide recession technically occurs, for many families it is already at home.
Another challenge is that the outlook itself is shifting rapidly. The economic assumptions underpinning the budget would have been set weeks ago, and as such would not have incorporated the potential effects of war in the Middle East. Rising oil prices alone could weigh on Ontario’s growth prospects. By the ministry’s estimate, a USD $10 increase in crude could shave up to 0.3 percentage points off GDP growth. Forecasts of oil prices are moving rapidly upwards. The forecast is being built on ground that is already shifting.
A few more pressure points stick out. Health care is the biggest, with spending pressures driven by demographics, service demands, and system capacity constraints. The finance minister has described current trends in health care spending as unsustainable — not language governments use lightly. The budget will need to set out not only updated spending levels, but a credible path to managing the cost pressures, particularly if it assumes slower expense growth than suggested by the FAO.
Post-secondary education spending will be a fascinating read. The government’s much touted $6.4 billion injection into the system needs to be costed. How does that weigh against OSAP related savings? Deepening the mystery is that OSAP costs this year are projected to come in nearly double what was expected, without a convincing explanation. At the same time, the finances of the college sector (disrupted by declining international student enrolment) will flow through provincial accounts in ways that may be difficult to untangle. The numbers will be there. Making sense of them will be another matter.
So, what should the government do? Reserves and contingency funds will shape the government’s ability to respond if conditions deteriorate. Given elevated risks, maintaining robust fiscal prudence margins may prove important — even if that implies somewhat higher deficits moving forward.
While attention tends to focus on the deficit, the outlook for provincial debt is important. Debt reflects annual deficits as well as borrowing to finance capital investments, and Ontario continues to borrow heavily to support its infrastructure plan. Here, constraints are emerging: capacity limits in the construction sector, rising project costs, and broader fiscal pressures. The implications of this borrowing should not be overlooked. Debt has a habit of moving in one direction: up. Once it does, it narrows the choices that follow.
Affordability remains a central concern for Ontario families. Measures to reduce costs for households and businesses have been a defining feature of this government. These policies have also contributed to higher deficits, debt, and interest costs over time. Fuel taxation is one area to watch. Further relief may be tempting given the outsized role gasoline prices play in public perceptions of affordability.
Poverty reduction, homelessness, and social assistance are also worth watching. These have not been priorities of the current government, but recent moves in post-secondary education suggest policy positions can shift. New initiatives to support longer-term economic transition — particularly in education, skills, and workforce training — are slower-moving levers, but they tend to matter most over time.
If recent practice is any guide, most of the key policy announcements will occur ahead of the budget itself, leaving the fiscal plan as the main reveal.
As Bethlenfalvy delivers his sixth budget, Ontario finds itself at another turning point. After years of economic upheaval, the province now faces a familiar mix of slower growth, rising spending pressures, and difficult trade-offs. Whether this budget marks a shift in direction or a continuation of the current approach will become clear soon enough. The constraints are already visible — and the room to maneuver is getting tighter.