TORONTO - The province won't cut services such as health care and education even though experts are warning the province may already be in a recession and may soon be facing skyrocketing gas and food prices, Premier Dalton McGuinty said Friday.

It's his job to remain positive through this period of "economic challenge," McGuinty said after speaking at a trade show of environmentally friendly consumer products.

"I'm going to keep my eye on the concerns of ordinary Ontario families," McGuinty said.

"I think the first thing they're saying to me is, 'Don't you dare cut my health-care services, don't you dare touch my kid's school, and you make sure that my son or my daughter has accessibility to colleges and universities.' And we're not going to touch those things."

Some experts have already concluded that Ontario - once the driving force of Canada's economy - is in the midst of a mild recession.

Other economists are sounding the alarm about soaring food and gas prices, warning that fuel could reach $1.40 per litre this summer and $2.25 a litre by 2012, which will drive up the cost of food.

But McGuinty downplayed those concerns, saying the province is expected to grow this year - albeit slowly. And while he's concerned about the economy, McGuinty said he's confident the province's budget will remain balanced.

"Our job, as I see it, in government is to give people good reasons to be hopeful, and there are good reasons to be hopeful," he said.

"Yeah, it's a period of economic challenge. But of all the places that you might find yourselves on this planet, where you have to cope with economic challenge, I couldn't pick a better place than right here, given our foundation, our history, our opportunities."

In the meantime, the Liberal government will continue to find ways to stimulate the slowing economy, which includes cutting business taxes and investing in infrastructure, skills and education, he said.

But McGuinty is too late because cuts are already being made, said NDP Leader Howard Hampton.

"That's why you've got half the hospitals in Ontario saying, 'We can't live on the budget that we have,"' he said. "And that's why you have so many school boards looking at shutting down schools."

A recent study concluded that 300 half-empty schools are now up for closure across Ontario, largely due to declining enrolment and an outdated funding system that hasn't kept pace with lower birth rates.

Ontario, which contributes about 40 per cent of the country's gross domestic product, has been grappling with a slowing economy, particularly in its hard-hit manufacturing sector, which has suffered massive job losses over the last few years.

Federal Finance Minister Jim Flaherty has called on McGuinty to slash business taxes to attract investment, but the premier has steadfastly refused to make any more cuts because he says it will force his government to cut social programs.

But McGuinty's complacent remarks provide little comfort to the 3,000 workers who lost their jobs this month alone, said Progressive Conservative Leader John Tory.

"He's living in a dream world," he said.

"The hotter and more intense the flames of economic slowdown and recession get, the more bromides he shovels at us."

Instead, McGuinty should focus on cutting business taxes and show some restraint in hiring highly paid senior government officials, he said.

"I think they only know how to run a government that had money pouring in by the day and by the hour, and they knew how to spend it because that's all they knew how to do," Tory said.

"They don't know how to make decisions in more challenging times and they don't know what to do to stimulate job creation and investment in Ontario."

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