Budget watchdog forecasts sharp rise in deficit to $68.5B this year

By Canadian Press on September 25, 2025.

OTTAWA — The parliamentary budget officer says he expects the upcoming fall budget will reveal a sharp increase in Ottawa’s annual deficit to $68.5 billion this year, up from $51.7 billion last year.

Interim PBO Jason Jacques also says in a new report that federal debt-to-GDP is no longer on a declining path over the medium term — a ratio that previously was a key fiscal anchor for the federal government.

The office’s updated fiscal and economic outlooks, published this morning, offer parliamentarians a baseline estimate of the state of federal finances heading into the Liberals’ fall budget on Nov. 4.

The PBO’s update does not include plans to incrementally ramp up defence spending to meet the updated NATO benchmark of five per cent of GDP by 2035, nor does it factor in Ottawa’s announced plans to reduce public service spending over the next three years.

But the report does account for some $115.1 billion in net new spending over five years announced by the government since the last fiscal update in December of last year.

The office says an economy weakened by Canada’s trade war with the United States is dragging down Ottawa’s tax revenue and pushing deficits higher as the Liberals also ramp up capital spending.

This report by The Canadian Press was first published Sept. 24, 2025.

Craig Lord, The Canadian Press