Ottawa, Sep 1 (IANS): While Canada appears to be on track in reducing its budgetary deficit, global economic uncertainty could stall the government's plan, the federal Finance Department warned.

For the first three months of the 2012-13 fiscal year that ended June 30, the budgetary deficit was 1.98 billion Canadian dollars, or less than half of the 4.24-billion deficit reported for the same period last year, reported Xinhua.

During the first quarter of the current fiscal year, revenues increased by 4.7 percent to 2.8 billion dollars as a result of higher income tax revenues, excise taxes and duties, and revenues from Employment Insurance premiums deducted by employers from employees' insurable earnings.

By comparison, government programme expenses rose by only 1.8 percent, or 1 billion dollars.

"However, recent economic developments suggest that there are downside risks to the fiscal outlook," said the Finance Department update Friday.

In its 2012 budget, the Canadian government set a target for 2012-2013 to reduce the federal deficit to 21.1 billion dollars and balance the budget by 2015-16 with a 3.4-billion dollar surplus.

Other numbers released Friday reveal that Canada's economy, the world's 10th largest, according to International Monetary Fund estimates based on gross domestic product (GDP) in US dollars, remains sluggish.

Statistics Canada, the country's data-collection-and-analysis agency, reported that Canada's GDP rose by 0.5 percent in the second quarter (April to June) of 2012 to 1.8 percent on an annual basis, an increase attributed mainly to business investment.

The pace of Canadian economic growth was at 0.5 percent during the two previous quarters, but somewhat better than the US economy which grew by 1.7 percent in the second quarter of 2012 at an annualized rate.

Federal Finance Minister Jim Flaherty said that while Canada's GDP growth is "modest, it reinforces that Canada is on the right economic track compared to other countries".

But while the Canadian economy performed "slightly better than expected" in the second quarter, "the pace was still nothing to write home about", according to Douglas Porter, deputy chief economist at BMO Capital Markets.

"The economy is essentially growing right in line with the US now, and is still rising below potential."