Nova Scotia's response to dealing with the potential effects of a downturn in the world economy will not include running a deficit, Premier Rodney MacDonald declared Thursday.

"We will not have a deficit in Nova Scotia," MacDonald bluntly told reporters following the weekly cabinet meeting.

The premier said that while the extent of the fallout from world markets likely won't be apparent for months, the province will take steps to ensure it doesn't add to its $12.1-billion debt.

"What will happen to the stock market in the next six to eight months is anyone's guess. As a province, we're going to ensure that we remain within our financial envelope and that may mean tightening our belt … before the end of the fiscal year."

He added that if the economic situation required the government to make spending cuts to balance the books then steps would be taken.

But he refused to speculate about any potential cuts.

"What I will say, is that if the government needs to make changes and make reductions in certain areas, we're prepared to do that if it means staying within our means," he said.

The premier also ruled out tax increases as a way of boosting government revenues.

During his budget forecast in August, Finance Minister Michael Baker pledged the Progressive Conservative government would table its eighth consecutive balanced budget in the spring.

But he also warned at the time that market volatility affecting energy prices could place pressure on a bottom line that has been boosted by revenues from offshore gas royalties.

Although Baker forecast a budget surplus of $355 million for fiscal 2008-09, he also said the province had already added an $8 million contingency to cover increased energy costs for school boards and $32 million in highway spending to deal with rising asphalt and construction costs.

NDP Leader Darrell Dexter said it was too early to tell where the pressure will fall during the current budget year.

He said Nova Scotia's revenues will likely decline if world energy prices continue to fall, but added a lower Canadian dollar would help the province's other commodity sectors, including forestry, agriculture and the fisheries.

Dexter maintains the bigger issue lies in whether the Canadian economy slips into a recession.

"That will have a profound impact on revenues in the next budget year and I think that's where we're going to see the majority of the pressure on budgets," he said.

While Liberal Leader Stephen McNeil said he agrees the government needs to live within its means, he will remain vigilant to ensure that no unnecessary cuts to programs are made.

"It would be unconscionable for anyone including this government to take advantage of this situation to further their political agenda," he said.

Meanwhile, MacDonald said he would join other premiers and provincial finance ministers in Quebec next week to discuss approaches to bolstering the Canadian economy.

He said he hopes a consensus can be reached on measures such as lower business taxes and helping companies diversify to open new markets.