TORONTO (Reuters) - The Canadian province of Ontario trimmed its economic growth forecasts for the next three years on Monday but left its deficit targets unchanged and said its budget will be balanced by 2017-18.
In his fall fiscal update, Finance Minister Charles Sousa projected a deficit of C$12.5 billion ($11.1 billion) in fiscal 2014-15, ending March 31, unchanged from the forecast the province’s Liberal government made in its July budget.
While the revenue projection for the current fiscal year is C$509 million lower than the government forecast in the July budget, reflecting a drop in tax revenues, expenses were also C$208 million lower due to a fall in debt expense. The government tapped its contingency fund to cover the remaining shortfall and maintain its deficit forecast.
Sousa said real gross domestic product growth in Ontario, Canada’s most populous province, which accounts for about 40 percent of the country’s economy, would be 1.9 percent in 2014. That’s down 0.2 percentage points from the July budget forecast.
He said growth is projected to pick up to 2.4 percent next year and through 2017, also a slightly slower pace than was forecast in July.
There were no policy initiatives in the fiscal update. The Liberals were re-elected in June, turning their minority in the legislature to a majority after the opposition New Democratic Party rejected the government’s April budget, a political miscalculation that cost the NDP the balance of power.
Sousa projected the deficit will fall to C$8.9 billion in 2015-16 and C$5.3 billion in 2016-17, with a balanced budget the following year. He pledged to keep spending under control to meet his budget projections.
“Will the discipline to hit these targets be maintained? That’s the question that investors and credit rating agencies (both Moody’s and S&P have a negative outlook on the province’s rating) will be asking heading into the 2015 budget season,” BMO Capital Markets senior economist Robert Kavcic said in a research note.
Ontario’s net debt is projected to hit C$287.3 billion, or 39.9 percent of GDP, at the end of fiscal 2014-15, a touch lower than was projected four months ago. The ratio is expected to peak in 2015-16 at 40.4 percent. Total borrowing requirements were unchanged at C$35 billion for the fiscal year.
Reporting by Andrea Hopkins; Editing by Peter Galloway