August 14, 2012 / 8:53 PM / in 5 years

Ontario sticks to 2012-13 budget deficit forecast

TORONTO (Reuters) - Ontario’s debt-strapped Liberal government on Tuesday stuck to its forecast of a C$14.8 billion deficit for this financial year, and said it still planned to balance the budget by 2017-18.

The province’s first-quarter financial update said both revenues and expenses were set to come in slightly above previous estimates, leaving the deficit unchanged.

“The...government remains committed to managing growth in spending and eliminating the deficit by 2017-18,” a government statement said.

Analysts and rating agencies have worried that Ontario’s budget is too ambitious, and in April Moody’s downgraded Ontario’s debt by one notch, reflecting doubts about Ontario’s ability to bite into rising debt levels. Standard & Poor’s has also warned of a possible downgrade.

Ontario released its fiscal update just over three weeks before two crucial by-elections in the province, which is Canada’s economic powerhouse and the home to much of its manufacturing sector.

If the Liberals win both seats they can transform their minority government into a stable majority.

In its budget, the government vowed to rein in public sector labor costs, halt corporate tax cuts and introduce a new tax on the wealthiest earners. It is in disputes with teachers and other unionized workers over its cost-cutting plans.

($1 = $0.99 Canadian dollars)

Reporting by Claire Sibonney; Editing by Janet Guttsman

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