Ontario deficit will triple as economy weakens, 2024 budget shows

High interest rates are expected to take a toll on Ontario's economy this year, the province said in its 2024 budget, which includes projections of weak economic growth and a ballooning deficit.

Finance Minister Peter Bethlenfalvy tabled the government's $214-billion budget at Queen's Park Tuesday, saying it is investing in housing, roads and public services during a time of uncertainty without raising taxes.

"These investments and more are a signal to Ontarians of our commitment to keep building Ontario while retaining a prudent, targeted and a responsible approach to public finances," Bethlenfalvy said at a news conference.

"We're not backing down from investing in what matters most and we are not going to increase costs on our people."

CBC News is carrying Bethlenfalvy's speech live. You can watch it in the player above.

The 200-page document forecasts Ontario's deficit will more than triple from $3 billion last year to $9.8 billion in 2024-2025 — the highest non-COVID budget deficit since former premier Kathleen Wynne's 2014 spending plan.

Last year's budget predicted Ontario would be back in the black with a modest surplus of $200 million by 2024-2025. Now, the province doesn't expect to return to balance until 2026-2027, when a $500 million surplus is projected.

The increase to the deficit was largely caused by slowing economic growth projections leading to lower tax revenues, an official with the Ministry of Finance said at a technical briefing for the media, but also due to an expected drop in revenue caused by the federal cap on international study permits.

Also driving spending upwards are more than $6 billion in payments to public sector workers last year and this year as a result of the provincial government's wage-restraint legislation being found unconstitutional and another extension to the gas tax cut, the budget says.

The outlook for economic growth has "deteriorated significantly" over the last year, the government says, with gross domestic product (GDP) expected to slow to 0.3 per cent in 2024, down from the estimate of 1.2 per cent in last year's budget.

While GDP is expected to recover to 1.9 per cent in 2025 and 2.2 per cent over the next two years, those numbers are still below previous forecasts. 

Inflation is expected to slow from 3.8 per cent in 2023 to 2.6 per cent in 2024, before returning to the Bank of Canada's target rate of two per cent in 2025, according to projections from the finance ministry.

"We're not immune from global forces in the economic environment, so our revenues are down and the costs for many things are up, including for governments," Bethlenfalvy told reporters.

"You can either put on the brakes or you can keep going forward, supporting the infrastructure spend, supporting the economy, supporting workers, and that's the way we've chosen."