The NDP government's projected deficit for 2011-12 now stands at $319 million, $70 million less than originally forecast, Steele announced as he released his updated budget forecast.
It's not the first time the government's budget update has turned out to be more positive than expected. In July, the province recorded the 2010-11 budget surplus at $569 million, after forecasting a $222 million deficit in the original budget projections last year.
The wild swings in the numbers have prompted opposition critics to conclude that the government's fiscal updates are worthless.
However, Steele insisted the latest numbers represent a more accurate picture of the province's finances, and he stressed that the government remains committed to balancing the budget in 2013-14.
"It's worth reminding folks as well that this year's forecast deficit is very close to where we expected to be at this point in our four-year plan," he said.
Steele said the province now expects to take in $8.9 billion in revenue, which is close to the original forecast despite increases expected from personal and corporate incomes taxes. The province has also benefited from lower debt services costs associated with historically low interest rates.
The minister said the government has also succeeded in keeping a tight rein on spending. Total expenses are forecast to be $9.2 billion, $81 million lower than in the budget.
However, Steele said the province's fortunes could turn in the months ahead if the global economic outlook continues to sour.
"There are disquieting signs of the national and international recovery going more slowly than anticipated," he told a news conference. "But there is, in my view, too much uncertainty to warrant revising Nova Scotia's economic outlook as part of this forecast update."
He said the province could be hurt by the sputtering U.S. economy, the looming European debt crisis and the fact that Canada's economy stalled in the most recent quarter.
As well, he said the closure of the NewPage paper mill in Cape Breton -- at a cost of 1,000 jobs -- won't help the province's bottom line.
"For all of these reasons, it's become more likely, though still not certain, that the Canadian economy, and therefore the Nova Scotia economy, will see more modest growth than previously anticipated."
Steele confirmed the latest projections did not take into account the indefinite shutdown of the mill in Point Tupper.
He said the government remains hopeful the mill will be sold and restarted.
But Steele admitted that a prolonged closure could have a major impact on the province's economic growth, noting that NewPage accounts for a big chunk of Nova Scotia's gross domestic product.
"The NewPage mill situation brings a new risk to the economic assumptions underlying the spring budget," he said.
Liberal finance critic Diana Whalen said Steele's projections still lack credibility.
"There's so many uncertainties still outstanding that have not been reflected in any of the numbers that we've seen," she said, citing the NewPage closure as one example.
She also criticized the government for being too timid about budget cutting, suggesting the NDP is postponing some hard decisions about spending.
"I just don't see it in the numbers that he gave us today," she said. "There's some incremental changes, but they're very small."
Conservative Leader Jamie Baillie said the government's latest projections are nothing to crow about.
He said the New Democrats' decision to raise the HST by two percentage points last July has hurt the economy, as has the government's failure to deal with expensive electricity rates.
"A new, job-creating budget and a new electricity plan are needed to replace the NDP's expensive plan," he said in a statement. "High taxes and power rates will claim many more jobs if the government doesn't take action."