UPDATE 3-Ontario premier resigns, says party needs renewal
* Premier makes surprise announcement one year after election
* Opposition leaders slam decision to adjourn legislature
* Ontario accounts for about 40 percent of Canadian economy
TORONTO, Oct 15 (Reuters) - Ontario Premier Dalton McGuinty announced on Monday he was resigning as head of Canada's most populous province just one year after winning a third successive term, saying it was time for a renewal in leadership.
The province, which accounts for about 40 percent of Canada's economy, has been battling huge budget deficits and slow growth since its record shortfall of nearly C$25 billion ($25.58 billion) in 2009 during the global recession.
McGuinty, who will stay on until his Liberal party finds a successor, asked the provincial lieutenant governor to end the legislative session, which means work on all bills would come to an end.
"After 16 years as leader of the Ontario Liberal Party and after nine years as premier, it's time for renewal, it's time for the next Liberal premier," McGuinty said.
Provincial opposition leaders slammed the decision to adjourn the legislature because of a number of big issues facing the province, including battles with the public sector over wage freezes and controversy over the cancellation of two natural gas-powered electricity plants.
"I don't understand his decision to suspend the legislature," Tim Hudak, leader of the opposition Conservatives, told a news conference.
McGuinty's departure could mean Ontario will be going to the polls as early as next spring, according to political analysts.
The premier was asked by reporters whether he would run in the race now under way for the leadership of the federal Liberal party but said only, "I don't have any plans."
Dubbed by critics as the Teflon leader for his ability to escape crises, McGuinty became Leader of the Ontario Liberal Party in 1996 and led his party to a majority government in 2003 and in 2007. In 2011, his party managed only a minority government, meaning the government would need to broker deals with opposition parties to pass legislation.
Since winning re-election, McGuinty's Liberals have been dogged by scandals such as mismanagement of Ontario's air ambulance service and contempt charges against the energy minister for being slow to release documents related to the costly cancellations of the two gas-powered plants in the province. Ontario has been struggling with a high budgetary deficit but announced on Monday it was cutting its shortfall faster than projected, crediting higher-than-expected growth and tax revenues.
In its budget this spring, the government vowed to rein in public sector labor costs, halt corporate tax cuts and raise taxes on the wealthiest earners.
In its autumn economic statement, Ontario projected the 2012-13 deficit would be C$14.4 billion ($14.69 billion), down from the C$14.8 billion forecast in April.
It kept its 2013-14 and 2014-15 deficit forecasts at C$12.8 billion and C$10.1 billion, respectively.
The premier's resignation will also be watched by the province's creditors as debt rating agencies raise scrutiny of the province's finances.
" It adds an element of uncertainty to the implementation of the fiscal recovery plan as a new premier could have different priorities," Eric Beauchemin, managing director of public finance at the credit rating agency DBRS, told Reuters.
"Nonetheless we know that the province remains on track with its plan as reflected in the fall statement released today, which we find encouraging."