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CALGARY, Alberta, Feb 23 (Reuters) - The government of Alberta, Canada's crude-producing province, kept its 2016-17 budget deficit forecast steady on Thursday in a third-quarter fiscal update, and said the province's battered economy was turning a corner after a prolonged downturn.
The budget shortfall is expected to be C$10.8 billion ($8.24 billion), unchanged from the government's last forecast in November, but higher than the C$10.4 billion gap originally forecast in the 2016-17 budget released in April.
Alberta's economy is expected to grow 2.4 percent this year, helped by higher global crude pries and a pick-up in manufacturing exports.
However, the New Democratic Party government also updated its figures for 2016, which showed an economic contraction of 2.8 percent, far more painful than the 1.4 percent decline originally expected.
"A full economic recovery will take time after such a long downturn, but we are starting to see encouraging signs for Alberta in the year ahead," said Finance Minister Joe Ceci.
Alberta is home to Canada's vast oil sands and is the No. 1 exporter of crude to the United States. It has been hard hit by the collapse in global crude prices since mid-2014, as producers laid off tens of thousands of oil and gas workers and cut billions in capital spending.
Total revenues for 2016-17 are forecast to be C$42.9 billion, C$1.5 billion higher than at budget, due to improving resource revenues, federal transfers and investment income.
The government raised it price forecast for benchmark U.S. crude to $48 a barrel, up from $42 a barrel originally.
Expenses also rose, by C$2.6 billion to C$53.7 billion, mainly because of a one-time expense related to payments to electricity producers to phase out coal-fired generation, a key component of the government's climate plan.
Capital spending is expected to be C$7.3 billion, a C$1.2 billion decrease from budget. ($1 = 1.3112 Canadian dollars) (Reporting by Nia Williams; Editing by Leslie Adler)