The Canadian province of Ontario, wounded by the global economic slowdown, expects to post a budget deficit of C$500 million ($400 million) in the current fiscal year as revenues are projected to be C$918 million below its March forecast.
The provincial government said on Wednesday that it plans to rein in spending on some programs and cut internal government expenditures to deal with its first budget shortfall in four years. It also said that overall spending in 2008-09 would be C$132 million higher than planned due to higher health-related expenses.
“Economists have been forced by unprecedented economic volatility to dramatically alter their growth projections for the United States, for Canada, for Ontario, and for the world,” Finance Minister Dwight Duncan told the provincial legislature in an economic and fiscal update.
Last March, Ontario had expected to balance its books in the current 2008-09 year, which ends March 31, 2009, and the Finance Ministry reiterated that view in the summer.
But it is no longer “business as usual,” Duncan said.
The province slashed its projection for 2008 economic growth to just 0.1 percent, down from 1.1 percent previously, and said it will curb costs. For example, it will hire more nurses but at a slower pace than planned, and it will defer “less urgent” education capital improvement projects, Duncan said.
The growth outlook had already deteriorated soon after the March budget because of weaker U.S. demand, turbulent financial markets, the sharp jump in oil prices, and upheaval in the North American auto sector. Numerous auto plant shutdowns have been announced in Ontario in recent months.
All Canadian provinces will face pressure from slowing revenues, said Mario Angastiniotis, a credit analyst in the public finance group of rating agency Standard & Poor’s.
“I think the bigger risk is for 2009 because, so far, while the economy has slowed down in manufacturing, overall Ontario’s economy until the second half was still posting modest growth rates,” Angastiniotis told Reuters.