Updated outlook projects weaker growth and higher deficits, says Parliamentary Budget Officer
Ottawa (Ontario), June 4, 2026
The Parliamentary Budget Office (PBO) today released its Economic and Fiscal Outlook (EFO). The report provides a baseline projection to help parliamentarians gauge potential economic and fiscal outcomes under current policy settings.
Our outlook incorporates economic data up to May 8 and new measures announced by the Government in Budget 2025 and the Spring Economic Update 2026 (SEU).
"The budgetary deficit is projected to average around $64 billion over the next five years, with the debt service ratio reaching 13.1 per cent by 2030-31," said Parliamentary Budget Officer Annette Ryan. "Our baseline outlook is broadly in line with the Spring Economic Update. That said, stress testing shows that there is uncertainty surrounding the outlook.”
The growth in Canada's economy is moderating. With current U.S. tariffs treated as permanent, the PBO projects real GDP growth of 1.1 per cent in 2026 and 1.6 per cent in 2027. New measures in Budget 2025 and the SEU 2026 add $68.4 billion in net new spending between 2025‑26 and 2030‑31, putting additional pressure on federal expenses.
The budgetary deficit is expected to rise from $36.3 billion in 2024‑25 to $72.0 billion in 2025‑26, as modest revenue growth is outpaced by growth in expenses — largely reflecting new measures. Deficits are projected to average $4.6 billion more per year than in the SEU 2026, due to lower revenues (particularly personal income tax) and higher program expenses, partly offset by lower public debt charges.
If no new measures are introduced and temporary measures expire as planned, the deficit is projected to decline to $58.2 billion by 2030‑31, as revenues grow faster than program expenses, partially offset by rising public debt charges.
Because deficits remain persistent—averaging 1.8 per cent of GDP over the projection period—the federal debt-to-GDP ratio is expected to increase from 41.3 per cent in 2025‑26 to 42.5 per cent in 2030‑31. The ratio is expected to remain broadly flat over the medium term.
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