The red ink on Ontario’s books is now forecast to shrink by $322 million this year — to $16 billion — mainly thanks to a recent loan repayment from Chrysler six years ahead of schedule, the government said Monday.

But the outlook for the year remains iffy because debt crises unfolding in several countries could “hamper” the economy, the finance ministry cautioned in releasing figures for the first quarter of the fiscal year ending June 30.

“What’s happening in the U.S. and Europe represents significant risk but Ontario is no more at risk than any other part of the country,” RBC economist Robert Hogue told the Star.

He described the deficit reduction as a “minor” change and said Ontario’s finances, which include a $700 million reserve for emergencies in last spring’s budget, should hold up barring any major disasters on the economic front.

“They’ve got some padding in there.”

The new deficit number comes as all three parties at Queen’s Park campaign for the Oct. 6 election amid growing concerns about how the U.S. credit downgrade will continue to clobber stock markets and affect consumer spending, which powers two-thirds of the economy.

Progressive Conservatives said Premier Dalton McGuinty’s “spending problem” that pushed the deficit to more than $16 billion could leave the province in a bind if the economy bottoms out again so soon after the 2008 recession.

“The bottom line is we’ve got a country 60 or 70 miles away that’s obviously in trouble,” Progressive Conservative MPP Peter Shurman (Thornhill) said of the United States.

“When the U.S. gets a cold we get pneumonia.”

New Democrat finance critic Peter Tabuns (Toronto-Danforth) said the deficit reduction has “relatively small impact.” He said the larger concern remains the debt levels of Ontario families still feeling the pinch from the recession and the 13 per cent HST.

Ontario’s gain of $468 million from Chrysler on the loan repayment and an extra $43 million in tax revenue above projections in the March budget were offset by the loss of $150 million in federal equalization funding and government expenses that came in $13.9 million higher than expected, among other things.

The finance ministry said Ontario’s economy grew at an annualized rate of 3.2 per cent in the first quarter, the seventh consecutive gain since the recession.

Ontario lost 22,400 net jobs in July but the unemployment rate of 7.5 per cent is at its lowest since December 2008.