Finance Minister Jerome Kennedy provided the update Wednesday, just as pre-budget consultations were set to begin.
In December, the year-end deficit was estimated at $725-million, and deficits for the next two years are projected to be in the $1.6-billion range.
Kennedy calls it a significant and serious financial situation.
He says when times were good over the last 10 years, government doubled spending on health care, education, and infrastructure.
As well, Kennedy says funding to Memorial University has increased.
Pre-budget consultations begin today in Carbonear before hitting St. John's, Clarenville and Marystown on Friday and finishing in Labrador City on February 25.