Canada clings to small budget surplus in January

OTTAWA (Reuters) - Canada posted a small budget surplus both in January and in the first 10 months of the fiscal year despite predictions that it would run a deficit this year for the first time in more than a decade.

The Finance Department said on Friday that the January surplus totaled C$37 million ($29.8 million), down sharply from a surplus of C$1.16 billion in January of last year.

In the period from April 2008 to January 2009, Ottawa ran a surplus of C$496 million, compared with a C$9.61 billion surplus in the same period a year earlier.

Finance Minister Jim Flaherty has predicted the government will run a budget deficit of C$1.1 billion in the 2008-09 fiscal year ending March 31.

In the month of January, a drop in revenues from corporate taxes and the federal sales tax caused a 9.8 percent drop in overall revenues. That decline outpaced a 3.1 percent decrease in expenditures due to lower operating expenses by departments and agencies.

For the April-January period, revenues fell 1.7 percent -- again primarily due to lower intake from corporate income tax -- while expenses rose 4.7 percent.

($1=$1.24 Canadian)

(Reporting by Louise Egan; editing by Peter Galloway)