(Bloomberg) -- Ontario is close to balancing its budget in the coming year, with higher revenue from income tax and federal government transfers helping offset an anticipated economic slowdown in Canada’s most-populous province.

The province is forecasting a C$1.3 billion ($950 million) shortfall for the next fiscal year, Finance Minister Peter Bethlenfalvy said Thursday in his annual budget. That’s down from a C$2.2 billion deficit projected for the current year — which was revised from its previous estimate of a C$6.5 billion shortfall.

The provincial government is improving its fiscal projections amid a swelling population and employment gains, even with warnings of an uncertain outlook and a “moderating” economy. Ontario now accounts for almost 40% of both Canada’s economic output and overall population. Still, the budget assumes near zero economic growth in 2023, as the world navigates the impacts of geopolitical uncertainties, persistent inflation, recession worries and turmoil in the banking industry.

“While Ontario’s economy has remained resilient, the road ahead continues to be uncertain,” Bethlenfalvy said in a prepared remarks to the provincial parliament. “After unprecedented spending in response to the Covid-19 pandemic, now is the time to get the province back on a path to fiscal balance.”

Ontario is set to reach a surplus of C$200 million in fiscal 2024-25, including C$2 billion in a fund for contingencies. Next year’s budget includes C$1 billion in reserves for the fiscal year ending March 31.

“The magnitude of the fiscal improvement should be well received by creditors,” Marc Desormeaux, principal economist for Canadian economics at Desjardins Securities Inc., said in an interview, noting that Ontario’s financial position could get a further boost from its reserves down the road.

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Premier Doug Ford’s Progressive Conservative government forecasts that total revenue will rise 2% to C$204.4 billion in the coming year to outpace the 1% in cost increases. Ontario’s biggest revenue source — income taxes — will climb 6% while federal government transfers are predicted to rise more than 11%.

Among Ontario’s key pledges in Thursday’s budget is a push for greater spending on highways, hospitals and schools. The government said it plans to spend C$184 billion on such infrastructure investments over the next decade, including C$20.6 billion in the next year. Projects include expanded highways, new roads and expansions to subway and train networks around Toronto, Canada’s most-populous city.

The province also plans to issue C$27.5 billion in long-term debt in the coming fiscal year, its smallest issuance program in seven years, according to government disclosures. Ontario, the world’s largest sub-sovereign debt issuer, plans to borrow 75% to 90% of its debt plan from the domestic market, the government said.

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