quebec finance minister eric girard has his work cut out if he hopes to make good on a pledge to start balancing the books in four years.
as he prepares to table his fiscal 2024-25 budget tuesday, girard is grappling with arguably the worst set of economic conditions since the early days of the covid-19 pandemic .
not only has the economy slowed in the past year, but inflation — which swells government revenue — is down compared with the past two years and interest rates remain high, boosting the cost of future borrowings . last month, hydro-québec slashed the annual dividend it pays the government by $1 billion after experiencing one of its worst years for power outages.
and if that wasn’t enough, recent wage increases granted to public-sector workers will put extra strain on a government already facing increased health-care spending. premier françois legault warned quebecers last month about the “financial consequences” of the new labour deals, opening the door to a delay in reaching the 2027-28 balanced-budget goal while stressing there would be no service cuts or tax hikes.
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both kavcic and godbout say they wouldn’t be surprised if girard is forced to upsize his year-old prediction of a $3-billion deficit in 2024-2025. girard’s call that quebec would cut the shortfall by $1 billion annually before wiping it out in 2027-28 is also looking shaky, they say.
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girard’s november fiscal update assumed economic growth of 0.6 per cent in 2023 and 0.7 per cent — revised from 1.4 per cent — this year. in fact, conference board of canada economists calculate, 2023 growth probably came in at 0.3 per cent, a level it could stay at in 2024.
after taxes, the recent public-sector wage increases could cost quebec $620 million this year and up to $2.9 billion annually by 2027-28, according to a february document written by godbout and his team.
“until the pandemic, quebec had done fairly well in terms of getting its deficits in order and building up some reserves,” antunes said. “since the pandemic, the situation is quite different . all provinces have been strained and quebec is no exception.”
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quebec’s debt is rated aa2 by moody’s , aa- by s&p global ratings and aa2 by fitch ratings. all three ratings are investment grade.
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