Hydro IPO trims Ontario deficit, Quebec eyes balanced budget

Thu Nov 26, 2015 4:21pm EST
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By Leah Schnurr and Kevin Dougherty

OTTAWA/QUEBEC CITY (Reuters) - Canada's two most populous provinces gave better than expected budget updates on Thursday, as Ontario got help from the initial public offering of utility Hydro One Ltd and Quebec clamped down on spending.

Ontario expects to run a smaller-than-anticipated deficit of C$7.52 billion ($5.66 billion) in the 2015-16 fiscal year, its Liberal government said, down from the C$8.5 billion deficit it estimated in its April budget.

Total revenues are now seen at C$1.2 billion more than previously anticipated, but the biggest change came from revenues related to the initial public offering of power distributor Hydro One.

Non-tax revenue for the current fiscal year, which includes higher projected net revenue from the Hydro One sale, is seen C$1.1 billion higher than forecast.

"Ontario's bottom line is running ahead of expectations again this year - excellent," Robert Kavcic, senior economist at BMO Capital Markets, wrote in a note. "But, the improvement comes on the back of one-time asset sales, not underlying revenue or (more importantly) spending performance."

Ontario, which accounts for about 40 percent of Canada's economy, also forecast a smaller-than-expected deficit for next year and reaffirmed its promise to balance the budget in 2017-18.

Meanwhile, Quebec reaffirmed that it is "on track" to return to a balanced budget this year, with Finance Minister Carlos Leitão crediting tight spending controls for the turnaround.

Leitão, former chief economist at Laurentian Bank, said spending controls have also reduced the deficit for the previous 2014-15 fiscal year by C$1.25 billion, with the final shortfall last year at C$1.1 billion.   Continued...

The Canadian flag flies on Parliament Hill in Ottawa August 2, 2015. REUTERS/Blair Gable