Canada Parliamentary Budget Officer Predicts Deficit Increase to $68.5 Billion in 2025-26

Canada's Parliamentary Budget Officer (PBO) projects a sharp increase in the federal deficit to $68.5 billion in the 2025-26 fiscal year, up from $51.7 billion in 2024-25, with the deficit-to-GDP ratio rising from 1.7 percent to 2.2 percent. The PBO's updated fiscal outlook indicates that the federal debt-to-GDP ratio is no longer on a declining trend over the medium term, which had been a key fiscal anchor for the government. This fiscal deterioration is driven by weakened economic conditions partly due to Canada's trade tensions with the United States, leading to lower tax revenues and increased government capital spending. Although the report does not factor in planned incremental increases in defense spending to meet NATO benchmarks nor announced public service spending cuts, it includes about $115.1 billion in net new spending over five years. The PBO's findings set the baseline expectations for the upcoming federal budget scheduled for November 4, highlighting ongoing fiscal challenges ahead for the Canadian government.