Ontario is projecting a $4.5 billion deficit in the third quarter of this year

Ontario predicts it will end this fiscal year with a deficit of $4.5 billion, while remaining in a large contingency fund until then.

Finance Minister Peter Bethlenfalvi released the province's third-quarter finances on Monday, the last major fiscal update he will provide before the next budget is introduced by the end of March.

The current deficit forecast for 2023-2024 is $4.5 billion, $1.1 billion below Bethlenfalvi's fall economic statement forecast, but significantly higher than the $1.3 billion he expected during last year's budget.

Bethlenfalvi said the $1.1 billion improvement was due to higher revenue, including money from taxes and the federal government, and lower interest costs on the province's debt due to higher interest rate expectations.

“I'm pleased to report that inflationary pressures have eased somewhat for households across the province, providing much-needed relief to millions of Ontarians and their families,” he said at a press conference.

“These high interest rates from the Bank of Canada, as well as uncertainty about consumer price inflation, threaten Ontario's economic outlook.”

Ontario has added some new spending since the fall economic statement, including $1.7 billion in health care and more than $700 million in support for the city of Toronto.

Bethlenfalvi did not provide an exact amount, but said some of that $1.7 billion was used in retroactive payments to compensate health care workers for the government's wage cap legislation, known as Bill 124.

However, the $1.7 billion does not include funding to help hospitals that have warned they are facing operating deficits, but Betlenfalvi said the money will come.

“They're going to get a lot of funding soon because we're going to make it work,” he said.

The province has been using its contingency fund to pay for some new spending since the fall economic statement, and the fund, which was $5.4 billion during the fall economic update, now stands at $3.3 billion.