Ontario returns to budget balance, unveils drug coverage for youth

By Leah Schnurr

TORONTO (Reuters) - Canada's province of Ontario said on Thursday it would run a balanced budget this year for the first time since the global financial crisis and unveiled plans for universal drug coverage for children and young people.

Ontario, Canada's most populous province, said it would balance the books in the fiscal year 2017-18. That includes a C$600 million ($441 million) reserve, meaning the province could run a small surplus if it was not used.

Ontario said it would run balanced budgets in the two subsequent years, with a reserve of C$600 million in 2018-19 and C$900 million in 2019-20.

The Ontario Liberals, who control a majority in the government and are up for election next year, released a budget including more spending on healthcare and extended its infrastructure plan by an extra year.

It did not unveil further measures to rein in the hot housing market in Toronto, after introducing a tax on foreign home buyers earlier this month.

The province, which has one of the largest sub-sovereign debts in the world, also passed on paying down its debt, which will increase to C$301.9 billion as of March 2017. Its long-term borrowing will be C$26.4 billion in 2017-18.

Home to manufacturers and automakers, Ontario had run a deficit every year since 2008-09 as it was hit by the financial crisis.

Helped by a strong housing market, cheaper oil and a weaker Canadian dollar, the province has rebounded and forecast economic growth of 2.3 percent in 2017 and 2.1 percent in 2018.

It also expected slowing home prices and acknowledged the risks to the outlook, including uncertainty around U.S. economic policy and potential global trade restrictions that could dampen business sentiment.

Analysts were unsure the economic environment for the province would get much better and said it could be using its higher revenue to build more fiscal capacity.

Michael Dolega, senior economist at TD Bank, said some of the province's forecasts might be too rosy, including expectations for business investment to rebound.

"There are a lot of risks out there both for Ontario and outside of its borders that might affect the economic picture," he said.

The province said it would launch prescription drug coverage for Ontarians aged 24 and under as of January 2018, which would be available to families regardless of income.

The province currently covers drugs for seniors and people on social assistance.

($1=$1.3620 Canadian)

(Additional reporting by Fergal Smith; Editing by Chris Reese and Andrew Hay)