The Ontario government is set to record a $500-million deficit for 2008-09, and economic growth in the province is expected to be just 0.1%, the McGuinty government announced in its fall economic statement on Wednesday.

The government plans to cut back new spending as it makes efforts to further manage expenditures in the remaining five months of the 2008-09 fiscal year.

“Today’s economic reality is forcing governments around the world to re-examine their expenditures, adjust their assumptions and respond to an environment where the only constant is uncertainty,” said Ontario Finance Minister Dwight Duncan. “The government will bring greater focus to the management of its expenses and it is compelled to delay the implementation of and slow down some new spending.”

The province’s projected economic growth outlook for 2008 was cut to 0.1% from the 1.1% forecast in the 2008 Budget in March. As a result, projected revenue for the fiscal year will decline by $918 million, or 0.9% from the 2008 Budget forecast; and drop by 1.2% from revenue in fiscal 2007-08.

Total expenses are expected to rise by $132 million, or 0.1%, from the March Budget projections. The higher expenses are primarily a result of higher utilization-related costs in the Ontario Health Insurance Plan program, according to the outlook.

The government said it had partially drawn down the $750 million reserve for the fiscal year, but $200 million remains to protect against any adverse changes in revenue and expense outlooks that could result from changes in Ontario’s economic performance.

Duncan said the deficit would allow for continued investment in the government’s five-point economic plan, which includes investing in skills and knowledge, infrastructure, lowering business costs, strengthening the environment for innovation and forming key partnerships.

“This year’s projected deficit will allow the government to maintain its important investments in Ontario’s economic future as we work through the real challenges that confront the world today,” said Duncan. “Through the McGuinty government’s five-point economic plan, we are doing everything we can to protect key public services and build confidence in Ontario’s economy.”

In the outlook, the government acknowledged that economic uncertainty is likely to continue in the months ahead. It calls the plan “flexible so that it can accommodate changing economic circumstances.”

The Ontario Chamber of Commerce criticized the government’s plan for lacking economic stimulus. “While we are disappointed to see a deficit, it would be easier to accept if it were accompanied by a plan to stimulate the economy and to build a foundation for a more competitive province at the end of this economic turmoil,” said Len Crispino, president and CEO of the Ontario Chamber of Commerce.

The Toronto Board of Trade, meanwhile, applauded the plan for trimming expenditures yet maintaining commitments on infrastructure investments. But the board also had its criticisms: “The board is disappointed that the government did not take its advice to cut Ontario’s business taxes to stimulate growth,” said Carol Wilding, president and CEO.