Credit agency Standard and Poor's has downgraded Ontario's credit outlook from stable to negative for two years, Finance Minister Dwight Duncan told reporters Wednesday.

The credit agency will review its decision in two years and said there is a one-third chance it will further downgrade the province's credit rating at that time.

The decision comes the day after the Liberals passed a budget that aims to get its $15-billion deficit under control.

This decision does not mean borrowing costs will go up, but it does mean that Standard and Poor's thinks Ontario will face challenges as it tries to cuts costs.

"They're worried that the targets can't be hit, because they are aggressive," Duncan said.

The report issued by Standard and Poor's said Ontario's deficit remains "stubbornly high" and that the province's cost-containment plan is challenging if it hopes to achieve a balanced budget by 2018.

The report notes that the government will need to be successful in implementing its cost-cutting budget measures, should it hope to rein in its budget. These measures include a two-year public-sector salary freeze, managing current and future public-sector compensation, pension-plan cost containment and job reductions.

The report also said Ontario's minority government adds additional challenges. The government could fall before it implements all the cost-containment aspects of its budget.

The credit outlook downgrade comes just months after credit agency Moody's also warned Ontario of a potential lowered credit rating in December, should the province fail to get its deficit under control.

Duncan said that it is possible that other credit rating agencies could issue similar downgrade warnings as the province looks to pay down its debt.

"I welcome this. We have to embrace this," Duncan said, emphasizing that the rating means it's time to make the legislature work and to achieve the targets laid out in the budgets.

He also tried to focus on the fact that the agency chose to downgrade the outlook, rather than downgrade the credit rating altogether.

"Unlike the many other countries, and the United States last year, where they have downgraded, they chose to reaffirm this and watch to continue to see if we achieve our targets for the next two years," Duncan said.

While Duncan was "embracing" the outlook downgrade, Progressive Conservative finance critic Peter Shurman certainly wasn't, saying the province is already paying more than $10 billion on interest alone each year to service the debt.

"If that were a ministry, it would be the third-largest ministry in the Ontario government," Shurman said of the current debt interest. "We cannot sustain this level of interest."

Earlier on Wednesday, the finance minister announced that the deficit for 2011-12 was lower than anticipated, falling from a projected $15.3 billion to $15 billion.

Ontario's debt sat at $235 billion as of the end of the 2012 fiscal year, the Standard and Poor's report said.

With files from CTV Toronto's Paul Bliss