Ontario’s government is forecasting weaker economic growth for the years ahead, although the province’s deficit is a bit better than expected.

In its economic update released Thursday, finance minister Dwight Duncan said that the province is projecting real GDP growth of 3.2% this year, dropping to 2.2% in 2011, 2.5% in 2012 and 2.7% in 2013.

The government is projecting an $18.7 billion deficit for the current fiscal year, down from $19.3 billion last year. It aims to cut the deficit in half within five years and to eliminate it in eight years. The government said that it remains on rack to meet those goals. Total debt is projected to be $236.5 billion at the end of the fiscal year.

With the smaller deficit, and a proposed $1 billion payment from Borealis Infrastructure to renew the Teranet land registration contract, the province’s funding requirements for the current fiscal year are down by $2 billion since the last provincial budget. The resulting reduction in interest expense means that the total expenses are down 0.2% from the budget forecast, while revenues are up 0.7%.

The forecast long-term public borrowing requirement for 2010-11 is $38.7 billion. So far, about 71% of that long-term borrowing requirement has been completed, including $1.1 billion in Ontario Savings Bond sales.

Additionally, the government announced the introduction of a measure to reduce consumer energy bills by 10% starting January 1, 2011. The estimated cost of the proposed measure is $300 million in the current year, with an estimated full-year cost of $1.1 billion.