Economic and Fiscal Outlook – June 2026 - Office of the Parliamentary Budget Officer

This report provides a baseline projection to help parliamentarians gauge potential economic and fiscal outcomes under current policy settings.

Highlights

The Economic and Fiscal Outlook assessed that the Canadian economy grew by 1.7 per cent in 2025, with a weakened outlook thereafter.¹ Treating the current tariff environment as permanent, we now project real gross domestic product (GDP) growth of 1.1 per cent in 2026 and 1.6 per cent in 2027, down from 1.3 per cent and 1.8 per cent, respectively, from our September 2025 outlook.

After accounting for historical revisions, nominal GDP—the broadest measure of the Government's tax base—is projected to be, on average, $19.5 billion higher annually over the 2026 to 2030 period compared to the outlook from September, due to stronger energy prices.

PBO’s status quo fiscal outlook includes the incremental measures announced in Budget 2025 and the Spring Economic Update 2026. Combined, these measures amount to $68.4 billion in (net) new spending over 2025-26 to 2030-31.

PBO projects the budgetary deficit to increase from $36.3 billion (1.2 per cent of GDP) in 2024-25 to $72.0 billion (2.2 per cent of GDP) in 2025-26 as modest revenue growth is outpaced by growth in expenses — largely reflecting the introduction of new measures.

PBO projects budgetary deficits averaging $4.6 billion per year above the SEU 2026, reflecting lower revenues, particularly personal income tax, and higher program expenses, partially offset by lower public debt charges.

Recent trends point to atypical growth paths for elderly benefits and children's benefits. PBO will pursue further analysis regarding both expense categories.

Assuming no new measures are introduced and existing temporary measures sunset as scheduled; the budgetary deficit is projected to decline to $58.2 billion by 2030-31, as revenue growth outpaces growth in program expenses, partially offset by rising public debt charges.

Due to persistent budgetary deficits of on average 1.8 per cent of GDP over the projection horizon, the federal debt-to-GDP ratio is anticipated to increase from 41.3 per cent in 2025-26 to 42.5 per cent in 2030-31. Similar to our September outlook, the federal debt-to-GDP ratio is projected to remain flat over the medium term.