This document was published under a previous government and is available for archival and research purposes.


The government is projecting that it will restore balance to the Province’s finances for the first time since the 2008–09 global recession. In addition, Ontario’s economy has fully recovered from the global recession and has outpaced the economic growth not just of Canada, but of all G7 countries over the last three years.

In the 2010 Budget, the government committed to eliminating the deficit and returning to a balanced budget by 2017–18, a commitment that has been reiterated year after year.

Through targeted, measured and fiscally responsible decisions, Ontario has restored its fiscal and economic strength. Ontario has not only eliminated its deficit of more than $19 billion at the height of the recession; it has done so without cutting vital programs and services. The benefits of balanced budgets and a strengthening economy are already providing the government with the fiscal flexibility to do more to help Ontarians.

A balanced budget means that the government will no longer need to borrow to pay for its ongoing operating costs. The result: more money to invest in health care, education and other public services that matter most to Ontario families. A strong economy, together with a balanced budget, is positioning Ontario for long-term fiscal sustainability.

Ontario’s Return to Balance

The global recession of 2008–09 hit Ontario hard. Key sectors like manufacturing and forestry faced significant job losses and declines in economic output. Following a period of balanced budgets, Ontario was facing a critical challenge. Real gross domestic product (GDP) in Ontario declined at a faster pace than in the rest of Canada or the United States. Indeed, no other Canadian jurisdiction experienced a sharper decline in corporate tax revenues during the recession than Ontario.

In meeting the challenge of the recession head-on, the government refused to put vital public services at risk or resort to arbitrary, across-the-board cuts to programs. Instead, it chose to lessen the impact of the recession on Ontario families through short-term stimulus investments that preserved and created jobs while helping to restore economic growth. The government also chose to protect health care, education and other public services. In so doing, Ontario, like other jurisdictions in Canada and across the world, ran a deficit.

Supporting Ontarians and Ontario businesses was the right thing to do. To position the province to emerge from the global economic recession and return to sound financial footing, the government set out a plan to foster job creation and economic growth. A central tenet of that plan was to balance the budget by 2017–18.

The plan to balance was realistic and responsible. The government managed growth in program spending and began a process of transformation designed to improve the efficiency and effectiveness of public services, resulting in program expense, relative to GDP, returning to pre-recession levels. For example, the government retrained thousands of laid-off Ontarians who lost their jobs as a result of the recession, preparing them for new careers in Ontario’s diversifying economy. The government also encouraged businesses to stay in Ontario by reducing corporate income taxes and implementing the Harmonized Sales Tax (HST), a value-added tax system that removed billions in embedded costs paid by businesses.

The plan also responded to shifts in the economic climate and the needs of Ontarians. Beginning in 2012, as expectations for global economic growth weakened, the government took action to renew the economy and help Ontario seize new opportunities for growth and job creation. It is making historic investments in infrastructure, which are now projected to total more than $190 billion over the 13-year period beginning in 2014–15. Planned investments are expected to support 125,000 jobs, on average, each year. The Province also launched the 10-year, $2.7-billion Jobs and Prosperity Fund to attract significant business investments, creating and retaining more than 37,600 jobs since 2013.

Ontario’s plan to grow the economy and protect services has paid off. Despite an uncertain global environment, Ontario’s economy continues to grow. Exports are up, businesses are hiring more workers and household incomes are rising. In fact, Ontario’s real GDP is now 19.1 per cent above its recessionary low. Ontario’s unemployment rate also declined to 6.5 per cent in 2016, its lowest annual rate since 2007 and below the national average for the past two years. The strengthening of the economy has also resulted in increased revenue for the Province, supporting Ontario’s return to a balanced budget.

Ontario’s Balanced Budget

The 2017 Budget plan delivers on the government’s 2010 Budget commitment to restore balance in 2017–18. The Province is also projecting balanced budgets in both 2018–19 and 2019–20.

For the 2016–17 fiscal year, the government is forecasting a deficit of $1.5 billion, the eighth year in a row that it is projecting to beat its deficit target.

Chart 1.1: Ontario’s Return to Balance

Ontario's Return to Balance
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By continuing to overachieve on its fiscal targets, the Province’s accumulated deficit is $29.0 billion lower than it otherwise would have been relative to the 2010 Budget forecast. In addition, interest on debt savings over the period to balance now totals $24.0 billion relative to the 2010 Budget forecast.

Together with a growing economy, the government’s strategic approach to investing in and transforming public services has resulted in the program expense-to-GDP ratio returning to its pre-recession level. This achievement stems from prudent management of resources and responsible restraint of program spending growth, where appropriate, allowing Ontario to remain the province with the lowest program spending per capita. Historically low interest rates have also helped the government overachieve on its fiscal targets and supported its efforts to balance the budget while cost-effectively managing debt.

As outlined in the recently released Ontario’s Long-Term Report on the Economy, restoring balance adds stability to Ontario’s finances and positions the government to better respond to demographic challenges and unexpected global economic shocks that the province will face over the next decade. The government’s efforts to grow the economy, transform public services and manage spending responsibly over the past several years have also positioned the Province to build on the investments it has made to support health care, public education, modern infrastructure and lower business costs. A balanced budget means that Ontarians will continue to benefit from expanded services and more assistance with everyday costs. These include covering the costs of pharmacare for children and youth, providing electricity cost relief, and helping 100,000 more children access affordable, quality licensed child care.

Declining Net Debt-to-GDP

Like many jurisdictions around the world, the government responded to the global economic recession by making a choice to invest in the economy to stimulate economic growth, supporting jobs for Ontarians and enhancing opportunities for families and businesses. These investments resulted in more schools, more hospitals and modernized infrastructure in the form of improved roads, bridges and transit networks to increase Ontario’s competitiveness and spur economic growth. While these stimulus investments helped lift Ontario out of the economic recession, they also resulted in a rise to the net debt-to-GDP ratio starting in 2008–09.

Since peaking in 2014–15, the net debt-to-GDP ratio has been on a declining track as a result of Ontario’s economic growth and the government’s progress toward balance. The net debt-to-GDP ratio is projected to be 37.8 per cent in 2016–17 and is expected to continue to decline. The government is setting an interim net debt-to-GDP ratio target of 35 per cent by 2023–24 and continues to maintain a target of reducing the net debt-to-GDP ratio to its pre-recession level of 27 per cent, with current projections showing that this will be achieved by 2029–30.

Chart 1.2 Net Debt-to-GDP

Net Debt-to-GDP
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About 61 per cent of the increase in net debt from 2008–09 to 2016–17 is due to the deficit. The remaining net debt increase is a result of investments in capital assets. Balanced budgets from 2017–18 onwards will ensure that increases in net debt will be limited to net investments in capital assets. Such investments will work to increase economic growth and result in GDP growing more quickly than debt, thereby helping to lower the net debt-to-GDP ratio to its pre-recession level.

Chart 1.3 Net Debt Growth after Balance Is Due Only to Investments in Capital Assets

Net Debt Growth after Balance Is Due Only to Investments in Capital Assets
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A declining net debt-to-GDP ratio together with lower interest on debt costs, as a percentage of revenues, will allow for a greater percentage of government spending to be invested in programs and services.

Ontario’s Economic Performance

Ontario’s economy is performing well, with output and jobs rising.

The province was hit hard by the global recession, causing real GDP to decline by 4.7 per cent and resulting in more than 270,000 lost jobs.

Since the recession, Ontario’s economy has recovered, with real GDP rising by 19.1 per cent and nearly 700,000 jobs being created.

Ontario: A Growth Leader

Since 2014, Ontario has been an economic growth leader in Canada, and private-sector economists expect Ontario to remain one of the fastest growing provinces over the next two years. Over the 2014–16 period, Ontario’s real GDP growth has outpaced that of Canada and all other G7 countries.

Chart 1.4 Ontario’s Economic Growth Outpacing G7

Ontario’s Economic Growth Outpacing G7
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Ontario: Creating High-Quality Jobs

The majority of the jobs created since the recession were in industries that pay above-average wages, in the private sector and in full-time positions. The province’s unemployment rate declined from 9.6 per cent during the global recession to 6.4 per cent in March 2017, below the national average for the 24th consecutive month.

Chart 1.5 Employment Gains since June 2009 Concentrated in Full-Time and Private-Sector Positions

Employment Gains since June 2009 Concentrated in Full-Time and Private-Sector Positions
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Ontario’s Diverse Economy

The diversity of sectors is one of Ontario’s economic strengths and provides the province with a solid footing for ongoing broad-based growth. Many key sectors have grown into leaders in Canada and North America.

TABLE 1.1 Strong Sectors in Ontario’s Economy

Item Sector Key Fact Importance
Aerospace picture of airplane Second largest aerospace sector in Canada The aerospace products and parts manufacturing sector employs over 12,000 workers and contributes about 0.3 per cent of provincial GDP.
Agri-Food picture of barn One of North America’s largest and most significant food and beverage processing sectors The agri-food sector, including primary agriculture, food and beverage processing and services, supports over 800,000 workers and contributes over 6 per cent of GDP.
Auto picture of car The top North American subnational jurisdiction in vehicle assembly Auto assembly and parts manufacturing employs almost 107,000 workers and generates over 2 per cent of GDP.
Chemicals picture of beakers Ontario has Canada’s largest chemicals manufacturing cluster Chemicals manufacturing, including the production of basic organic and inorganic chemicals, synthetic resins and fertilizers, as well as an emerging biochemicals cluster, employs almost 45,000 workers and generates over 1 per cent of GDP.
Financial Services picture of bank Toronto is second largest by employment in North America Ontario’s financial services sector employs over 400,000 workers and contributes almost 10 per cent of GDP.
Forest Products picture of trees 2016 forest products exports were almost $5.2 billion Primary forestry and wood products and paper manufacturing employs over 38,000 workers and generates about 0.7 per cent of GDP.
ICT picture of person Second in information and communications technology (ICT) establishments in North America ICT manufacturing and diverse industries, such as software publishing, telecommunications and computer systems design, employs almost 231,000 workers and generates over 5 per cent of GDP.
Life Sciences picture of double helix Largest life sciences sector in Canada Life sciences, which includes pharmaceutical and medical devices manufacturing, accounted for about a quarter of all venture capital investments in Ontario in 2016.
Mining picture of tractor Top-10 world producer of nickel and platinum group metals Ontario’s mining industry, the nation’s largest producer of minerals, employs about 25,000 workers and generates about 1 per cent of GDP.
Creative Cluster picture of theatre masks Largest creative cluster in Canada and one of the largest in North America The creative cluster, which includes diverse industries such as publishing, film and music production, as well as amusement and recreation industries, employs over 320,000 workers and generates over 2 per cent of GDP.

Table 1.1 Footnotes:

Sources: Statistics Canada and Ontario Ministry of Finance.

Ontario’s Strong Trade Connections with the United States

Trade with the United States is vital for the Ontario economy, with international exports of goods and services accounting for 36 per cent of Ontario’s GDP. Although destinations for Ontario’s exports have grown more diversified over the last decade, the United States remains the province’s primary destination for international merchandise exports, accounting for 81 per cent of the total in 2016.

Healthy Ontario–U.S. trade is beneficial to both economies. In 2016, Ontario was the top export destination for 20 states and the second largest export destination for eight others. It is important to protect the benefits of this integrated partnership.

Chart 1.6 Ontario Is a Key Export Market for the United States

Ontario Is a Key Export Market for the United States
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Goods and services exports are increasingly integrated into the making of products, and Ontario is an important contributor to these global value chains.

The Province will continue to strengthen partnerships with the new administration in the United States, with partners in the Great Lakes region and with other states, recognizing that trade between Ontario and the United States and fair tax policy create benefits for workers and businesses on both sides of the border.

Maintaining Tax Competitiveness

Business tax reforms implemented by the government have lowered taxes and compliance costs, helping Ontario businesses become more competitive globally and contributing to the creation of more jobs for Ontarians. Experts have recently noted that Ontario enjoys a competitive advantage over a number of American states because of provincial and federal policy action on corporate income taxes over the past two decades.1

Ontario has introduced a number of reforms that have significantly enhanced Ontario’s tax competitiveness and business investment climate, saving businesses more than $10 billion per year. These savings are often reinvested into Ontario businesses, helping to spur further growth and create more jobs for Ontarians. These reforms include:

  • Implementing the Harmonized Sales Tax (HST);
  • Maintaining low Corporate Income Tax (CIT) rates;
  • Eliminating the Capital Tax; and
  • Cutting Business Education Tax (BET) rates.

Ontario’s general Corporate Income Tax (CIT) rate was reduced in stages from 14.0 per cent in 2009 to the current 11.5 per cent, and from 12 per cent to 10 per cent for resources, manufacturers and processors.

The Province’s combined federal–Ontario general CIT rate of 26.5 per cent is competitive within Canada and internationally. Ontario’s combined rate is lower than the comparable rate in any of the U.S. states and is lower than the average of Canadian provinces and the average of G7 member countries (see Chart 1.7).

Chart 1.7 Ontario’s Internationally Competitive Corporate Income Tax Rate

Ontario’s Internationally Competitive Corporate Income Tax Rate
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It is also important to consider other elements of the tax system when assessing the impact of business taxes on capital investment.

The marginal effective tax rate (METR) provides a comprehensive measure of the tax burden on new business investment by taking into account federal and provincial/state CIT, capital taxes and sales taxes.

With the decrease in the general CIT rate and other tax reductions, Ontario’s METR on new business investment has been cut significantly over the past seven years.

Ontario’s METR fell from 33.0 per cent in 2009 to 16.9 per cent in 2016 and will drop further as input tax credit restrictions associated with the HST are phased out. It is now lower than the average U.S. METR of 34.0 per cent and is one of the lowest in the G7.

This significant improvement in Ontario’s tax competitiveness for new business investment encourages businesses to locate or expand operations in Ontario, leading to more employment opportunities and greater economic growth.

Healthy Outlook for Ontario’s Economy

During the period of high commodity prices and an elevated Canadian dollar from 2003 to 2013, Ontario’s economy grew at a slower rate than the national average. However, for the last three years, its growth has outpaced the Canadian average. A growing economy in the United States, low oil prices and a competitive Canadian dollar provide a solid foundation for the future growth and continued strong performance of Ontario’s economy. Ontario is expected to remain one of the fastest growing provincial economies over the next two years.

Chart 1.8 Ontario’s Growth to Continue to Outpace Canada

Ontario’s Growth to Continue to Outpace Canada
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Ontario also faces a dramatically changing global economic and political environment. The heightened level of uncertainty, especially relating to international trade, has been intensified by recent developments in the United States and the United Kingdom. These outcomes amplify risks that mounting protectionism will increase trade barriers that could disrupt economic growth. The Province will continue to advocate for free trade and open and competitive access to government contracts and will consider all reasonable options to protect Ontario jobs in the face of Buy American policies or legislation.

In addition, economic changes over the past few decades have been driven by numerous factors, including technological advances and globalization. While these developments have generated significant economic benefits, they have also disrupted the lives of some Ontarians. For a full discussion of the economic outlook, see Chapter VI, Section B: Details on Ontario’s Finances and Economic Outlook.

The Path Forward for All

Ontario is delivering on its commitment to balance the budget in 2017–18 in a fair and responsible way.

Not all Ontarians are benefiting equally from the province’s return to economic strength. While Ontario’s unemployment rate in 2016 was at a nine-year low, and its economy is among the strongest in the country, too many Ontarians are still out of work or struggling to make ends meet. Even those with steady incomes are concerned about everyday costs. Hardworking Ontarians across the province deserve to be included in the benefits of growth.

To ensure everyone shares in this prosperity, the government will continue to work with partners in all regions and sectors to create jobs and strengthen communities. A strong economy, together with a balanced budget, is creating more opportunities for individuals and businesses in Ontario to get ahead and stay ahead. A balanced budget means that people will continue to benefit from expanded health care and education, and receive more assistance with everyday costs.

Ensuring that legitimate businesses have an equal opportunity to succeed is also part of the government’s plan to maintain balance. The government is taking action to combat the underground economy, strengthen the integrity of the tax system and ensure everyone pays their fair share of taxes. Additional ways to address tax loopholes and sophisticated tax planning schemes will be developed.

When businesses fail to report income for tax purposes or avoid sales taxes, there is less money available to fund public services. Going forward, the government will continue to introduce measures to better coordinate and strengthen compliance in high‐risk sectors to ensure a fair and equitable business environment.

Finally, the government will continue to review its programs to deliver the best possible results at the lowest cost. Evidence-based decision-making supports the use of limited public resources to improve outcomes and ensure the long-term sustainability of provincial programs and services that will meet the needs of Ontarians in the digital era.


1 Ontario, Legislative Assembly, Official Report of Debates (Hansard), 41st Parliament, 2nd Session, (January 18, 2017) at 1340.

Chart Descriptions

Chart 1.1: Ontario’s Return to Balance

This bar chart shows Ontario’s actual deficits versus deficit targets from 2009–10 through
2015–16, and the fiscal outlook for 2016–17 to 2019–20.

In the 2009 Ontario Economic Outlook and Fiscal Review, Ontario projected a $24.7-billion deficit for 2009–10. The actual result for 2009–10 was a deficit of $19.3 billion.

The 2010 Budget projected deficits of $19.7 billion for 2010–11, $17.3 billion for 2011–12, $15.9 billion for 2012–13, and $13.3 billion for 2013–14. The actual deficits were $14.0 billion in 2010–11, $13.0 billion in 2011–12, $9.2 billion in 2012–13, and $10.5 billion in 2013–14.

In the 2014 Budget, Ontario projected a $12.5-billion deficit for 2014–15. The actual result for 2014–15 was a deficit of $10.3 billion.

In the 2015 Budget, Ontario projected an $8.5-billion deficit for 2015–16. The actual result for 2015–16 was a deficit of $3.5 billion.

The 2016 Budget projected a deficit of $4.3 billion in 2016–17.

The government is projecting an interim deficit of $1.5 billion in 2016–17, and balanced budgets in 2017–18 through to 2019–20.

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Chart 1.2: Net Debt-to-GDP

This line chart shows Ontario’s net debt-to-GDP from 1990–91 to 2019–20.

The net debt-to-GDP ratio peaked at 39.1 per cent in 2014–15 and has since been on a declining track. It is projected to be 37.8 per cent in 2016–17, 37.5 per cent in 2017–18, 37.3 per cent in 2018–19 and 37.2 per cent in 2019–20.

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Chart 1.3: Net Debt Growth after Balance Is Due Only to Investments in Capital Assets

This bar chart shows the factors for growth in net debt from 2008–09 to 2019–20.

Between 2008–09 and 2016–17, the per cent increase in net debt is mainly due to the deficit, with net investments in capital assets responsible for the rest. Once a period of balanced budgets is reached in 2017–18 and onwards, growth in net debt will be 100 per cent due to investments in capital assets.

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Chart 1.4: Ontario’s Economic Growth Outpacing G7

The bar chart shows the real GDP average annual per cent change for all G7 countries and Ontario from 2014 to 2016. The change in real GDP for each jurisdiction is as follows: Italy (+0.6 per cent), Japan (+0.8 per cent), France (+1.0 per cent), Canada (+1.6 per cent), Germany (+1.7 per cent), United States (+2.2 per cent), United Kingdom (+2.4 per cent) and Ontario (+2.6 per cent).

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Chart 1.5: Employment Gains since June 2009 Concentrated in Full-Time and Private-Sector Positions

The line chart shows employment from 2008 to 2017 in Ontario. Since the recessionary low in June 2009, Ontario has added nearly 700,000 jobs, the majority of which are full-time and in the private sector. The pie charts provide greater detail. For example, since the recessionary low in June 2009, over 676,800 of the jobs created (98 per cent) were full-time, 503,600 positions (73 per cent) were added in the private sector and 538,900 jobs (78 per cent) were created in industries that pay above-average wages.

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Chart 1.6: Ontario Is a Key Export Market for the United States

This graphic highlights the U.S. states for which Ontario was the number one and number two market for international merchandise exports in 2016. Ontario was the number one export market for the following 20 states: Alabama, Arkansas, Georgia, Indiana, Kentucky, Maryland, Michigan, Mississippi, Missouri, New Jersey, New York, North Carolina, North Dakota, Ohio, Oklahoma, Pennsylvania, Tennessee, Virginia, West Virginia and Wisconsin. In 2016, Ontario was the number two export market for the following states: Colorado, Illinois, Iowa, Kansas, Minnesota, Nevada, Rhode Island and South Dakota.

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Chart 1.7: Ontario’s Internationally Competitive Corporate Income Tax Rate

This bar chart shows that in 2017, Ontario’s combined federal–provincial general Corporate Income Tax (CIT) rate of 26.5 per cent is well below the average U.S. federal–state CIT rate of 38.9 per cent and lower than the average CIT rate of G7 member countries of 30.8 per cent. Ontario’s combined federal–provincial general CIT rate is also lower than the average of Canadian provinces at 27.0 per cent, and competitive with the average CIT rate of Organisation for Economic Co-operation and Development (OECD) countries at 24.6 per cent.

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Chart 1.8: Ontario’s Growth To Continue to Outpace Canada

The bar chart shows the real GDP per cent change for Ontario and Canada from 2003 to 2020. From 2003 to 2013, Ontario’s average annual growth of 1.3 per cent lagged Canada’s average of 1.9 per cent. From 2014 to 2016, Ontario’s estimated average annual growth of 2.6 per cent surpassed the national average of 1.6 per cent. Based on the private sector average, Ontario’s projected average annual growth of 2.1 per cent from 2017 to 2020 is expected to continue to outpace projected Canadian growth of 1.9 per cent over the period.

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