07:57 AM EDT, 09/20/2024 (MT Newswires) -- On Thursday, Ontario announced that it had posted a budget deficit of C$600 million in the previous fiscal year (FY23/24), much smaller than the C$3.0 billion shortfall estimated in the latest budget, noted Bank of Montreal (BMO).

Investors will get an updated outlook in the fall, but for now, the Canadian province is expecting a much deeper C$9.8 billion fiscal hole this year, said the bank.

There may be some upside risk as economic growth is tracking stronger in 2024 -- BMO is expecting real gross domestic product at 1.4% versus the budget estimate of just 0.3%.

Still, interest rates and public sector wages remain elevated and will continue to add to spending pressures, according to the bank.

These factors certainly aren't unique to Ontario and highlight the possibility that provincial finances will be in a tougher position in the years to come, even as interest rates start to fall, according to BMO.