TORONTO -- Ontario's budget watchdog warns there is a "significant risk" the Liberals will not be able to erase the red ink from the province's books by 2017-18 as promised.

Financial accountability officer Stephen LeClair said Wednesday that there's been a slowdown in the economy since the 2015 provincial budget projected growth of 4.3 per cent in each of the next three years.

LeClair said growth will be just three per cent at best, which he warned will make it hard for the Liberals to stick to their "aggressive" budget plan to cap spending increases at 0.5 per cent annually. He said they could hit that target this year, but are unlikely to sustain such low spending growth in the next two years.

"Spending restraints get more difficult in each subsequent year as there are less and less opportunities for efficiencies," said LeClair. "If the government does not meet its spending targets but spending grows at the same (1.4-per-cent) rate as in the past four years...then there would be a $3.5 billion deficit in 2017-18."

LeClair also said a balanced budget by 2017-18 wasn't "out of reach" if the government spends less than planned, if nominal GDP comes in at what the private sector forecast is and if revenue grows in line with nominal GDP, which it hasn't done in Ontario in four years.

"So consider what I said: if, if, if," LeClair cautioned. "There's a lot of ifs there, and that is why we indicate that there is a downside risk to the government's forecast."

Finance Minister Charles Sousa pounced on LeClair's finding that the Liberals were able to limit spending growth and lower the deficit this year.

"The FAO said very clearly in his report that it is highly expected that the government will exceed again its deficit targets this year," he said. "We are on track to balance the budget by 2017-18."

The opposition parties accused Sousa of ignoring reality.

"The notion that they can see sunshine in everything just shows how out of touch they are," said Progressive Conservative Leader Patrick Brown. "All of their projections are off."

Like the Tories, the New Democrats predicted the Liberals would have to slash programs and services to eliminate the $10.3-billion deficit on schedule.

"It's very clear that without deep, deep cuts we're not going to get to balance by 2017-18, and the government needs to come clean as to what they're going to cut if they're going to achieve that goal," said NDP Leader Andrea Horwath. "

LeClair predicted slower economic growth will lead to a drop in revenue of up to $1 billion from the budget forecast for the current fiscal year.'

He couldn't say if the Liberal's plan to sell 60 per cent of Hydro One -- the first batch of shares go on sale Thursday -- would help eliminate the deficit on time.

"We haven't factored the Hydro One sale into this analysis because we don't know the degree to which it's already in the government's plans," said LeClair. "Will it improve or not improve their ability to meet the deficit targets? It all depends on how they roll it out."

Just last week, the new financial accountability officer warned the Liberals' plans to sell Hydro One would have a serious negative impact on Ontario's finances after an initial short-term gain.