Canada’s Ontario province cuts deficit forecast, proposes tax rebates

By Fergal Smith

TORONTO (Reuters) – The Canadian province of Ontario on Wednesday projected a narrower budget deficit for the current fiscal year and proposed providing rebates to taxpayers as its economy slowed less than previously anticipated, a fiscal update showed.

Ontario, Canada’s most populous province, said it expected a budget deficit of C$6.6 billion ($4.74 billion) for the 2024-25 fiscal year, compared to the C$9.8 billion deficit forecast in March’s budget.

A C$1.5 billion deficit is projected in 2025-26 before a return to surplus in 2026-27. The fiscal year ends on March 31.

The province, one of the world’s biggest sub-sovereign borrowers, raised its revenue forecast by C$6.9 billion to C$212.6 billion as it projected the economy would expand 0.9% in 2024. That compares to a 0.3% pace seen in the budget but slowing from 1.4% in 2023. It sees growth picking up to 1.7% in calendar year 2025.

“Our government’s responsible approach has resulted in an improved fiscal position since the 2024 budget, allowing us to keep taxes low, invest in infrastructure like roads, highways, hospitals and schools, and provide immediate relief to Ontario families as part of our plan to keep costs down,” Ontario Finance Minister Peter Bethlenfalvy said in a statement.

The province said it would provide a C$200 taxpayer rebate early next year for all eligible adult tax filers, plus an additional C$200 for eligible children, estimated to cost C$3 billion, to offset the burden for families of high interest rates.

Other measures include extending temporary gas tax and fuel tax rate cuts, keeping the rates at nine cents per liter until June 30, 2025.

The Bank of Canada has cut its benchmark rate by one and a quarter percentage points since June to 3.75%, after previously raising borrowing costs to the highest level in more than two decades to tame inflation.

The province plans investments to build and expand critical infrastructure over the next 10 years totaling C$191.3 billion, including C$26.3 billion in 2024-25.

The net debt-to-GDP ratio was projected to rise to 37.8% in the current fiscal year from 37.3% in 2023-24, a 12-year low, but lower than the 39.2% level previously forecast. It was then expected to edge up to 37.9% in 2025-26.

($1 = 1.3921 Canadian dollars)