PBO Releases Latest Economic and Fiscal Outlook
Ottawa (Ontario), September 25, 2025
The Office of the Parliamentary Budget Officer (PBO) today released its latest Economic and Fiscal Outlook (EFO). The report provides a baseline projection to help parliamentarians gauge potential economic and fiscal outcomes under current policy settings.
The PBO projects the Canadian economy will grow by just 1.2 per cent in both 2025 and 2026, as trade uncertainty and tariffs continue to weigh on growth. While growth is projected to rebound in 2027, structurally weaker trade conditions are expected to lower the level of real GDP by 0.5 per cent by 2030.
According to the report, “the economic outlook has deteriorated due to persistent trade tensions and the lasting impact of trade policies.”
The status quo outlook includes $115.1 billion in net new spending announced since the 2024 Fall Economic Statement but does not include incremental measures to achieve the North Atlantic Treaty Organization (NATO) Defence Investment Pledge of investing 5 per cent of annual GDP, or the Government’s Comprehensive Expenditure Review.
In the absence of final financial results for the previous fiscal year, the PBO estimates that there was a budgetary deficit of $51.7 billion (1.7 per cent of GDP) in 2024-25. For the current fiscal year, 2025 26, the PBO projects the deficit will increase sharply to $68.5 billion (2.2 per cent of GDP). Due to persistent budgetary deficits, the federal debt-to-GDP ratio is projected to rise above 43 per cent over the medium term.
The PBO further cautions, “Absent significant policy changes, the budgetary deficit is expected to remain elevated close to $60 billion over the medium term. The federal debt-to-GDP ratio is no longer projected to be on a declining path, which raises concerns about the long-term sustainability of current fiscal policy.”
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