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Canadian Press

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Meanwhile, the office predicts the deficit in next year’s budget could be as low as $3.5 billion, about $2 billion better than Finance Minister Jim Flaherty announced in last month’s fall economic update.

Given that Flaherty has included a $3-billion cushion for risk in all his assumptions, the PBO’s analysis suggests that it is theoretically possible for the government to bring in a balanced budget as early as next spring.

The improved fiscal track occurs even though the office forecasts lower economic growth over the next few years.

Despite the slower growth, the office says it believes Ottawa will save more than it is saying from a recently announced two-year departmental spending freeze and continuation of the recent practice of letting approved spending lapse.

The freeze and projected lapses will net Ottawa about $2.7 billion in the critical 2015-16 fiscal year, the report says, more than twice what the government has budgeted.

In addition keeping employment insurance premiums higher than necessary to fund the account in 2015 and 2016 will bring in about $4.2 billion.

But the watchdog also cautions that there are plenty of risks to the projections, including that the economy will not continue to expand as expected and that the government’s savings won’t materialize.

Still, the latest report gives a 65% probability that Ottawa will hit its target for a balanced budget in 2015, the year the Harper Conservatives will face the voters in a general election.