Ontario is headed for a mammoth deficit of $18 billion over the next two years as it combats the effects of the global economic downturn, Finance Minister Dwight Duncan revealed on Tuesday, calling the figure a "necessity."

Duncan unveiled the figure during a speech to a Toronto business audience three weeks ahead of his tabling of the province's $100-billion budget.

"A deficit is not something that we take lightly," Duncan said. "It is, however, a necessity in these challenging times."

Ontario has been faced with a dwindling economy mirroring the United States' own woes and staggering job losses in its manufacturing sector. Duncan and Premier Dalton McGuinty had previously warned the upcoming budget's deficit would be "significant."

The finance minister wouldn't say whether the shortfall would prompt program cuts, but promised no tax hikes.

"I think we ruled those out about two months ago," he said.

The province's announcement comes on the same day the Bank of Canada cut a key interest rate to try to stimulate the national economy.

Duncan said most of the deficit amount will come from declining revenues stemming from the global financial crisis, which hit as the province was committing billions to healthcare and infrastructure spending, as well as labour agreements with public servants.

"Like governments all over, we have seen a dramatic decline in revenues, starting about September," he said.

The finance minister said he would present a plan and detailed timeline to move the province out of deficit when the Liberal government tables the budget on March 26.

Liberals an 'extraordinary' failure: Tory critic

Progressive Conservative MPP Tim Hudak slammed the Liberals for their "extraordinary" failure of leadership on the economy and blasted the government's spending decisions in last October's economic update, which predicted the shortfall would be more in the range of $500 million.

"Instead of setting aside any cushion whatsoever for tough times, you've spent every single penny in one massive end-of-year spending spree," Hudak told the legislature.

NDP Leader Howard Hampton assailed the government for what he said was a lack of a plan to address the needs of 300,000 manufacturing workers who have lost their jobs in the last four years.

"What is your job plan?" he asked.

Earlier in the day, McGuinty said the budget would include funds to stimulate the economy, help create jobs and provide assistance to people struggling in the recession.

"We are going to use this budget to do what we believe Ontarians want us to do," the premier told the legislature. "Our budget will strive to do all those things."