TORONTO — Ontario is projecting a $13.1-billion deficit this fiscal year, down from the province's last forecast, mostly due to higher revenues.

In the third-quarter finances, released Monday, Finance Minister Peter Bethlenfalvy said the government has invested most of the $2.7 billion in COVID-19 relief funding announced as part of the fall economic statement, with $500 million remaining for the rest of the fiscal year, which ends on March 31.

The money has gone to hospitals, property tax and energy rebates for businesses, small business grants, long-term care homes and training for personal support workers.

"We've made incredible progress in fighting COVID-19 through record investments to protect Ontario's people, our progress and our economy," Bethlenfalvy said.

The 2021-22 deficit projection is $8.4 billion lower than in Ontario's fall economic statement, with revenues $8 billion higher than expected at that time.

The increased revenues largely come from taxes, as a result of stronger-than-expected economic activity.

"Ongoing supply chain challenges, international political instability, and rising cost of living continues to make forecasting a challenge," Bethlenfalvy said. 

"But we have laid a strong fiscal foundation on which our government will continue to build Ontario with a plan for recovery that invests in new highways and hospitals." 

Ontario's real GDP increased 1.4 per cent in the third quarter of 2021, putting it 1.2 per cent below the fourth quarter of 2019.

Many other economic indicators such as employment, retail, wholesale trade and manufacturing sales are now above or close to pre-pandemic levels, the province said.

The financial update comes not long before the province's anticipated budget, which has to be tabled by March 31.

Ontario's Financial Accountability Office released a report last week that predicted smaller deficits than the government's previous projections, largely due to increases in revenue.

The FAO expects a budget deficit of $2.8 billion by 2023-24, compared to a government outlook last fall of $11.4 billion.

The government's fall economic statement projects far less revenue compared to the FAO's assessment, and the fiscal watchdog says some of that gap — $1.7 billion in 2023-24 — could be potential unannounced tax cuts.

Bethlenfalvy wouldn't tip his hand to any budget items, but said affordability is a key issue.

"I constantly am reviewing, with the premier, a range of options that we can look at to be able to put more money in the pockets of the people of Ontario," he said.

The premier has promised a cut to the provincial gas tax before the next budget. As well, the Progressive Conservatives promised an income-tax cut in their 2018 election platform.

This report by The Canadian Press was first published Feb. 14, 2022.

Allison Jones, The Canadian Press