(Quebec) Citizens may be suffering from inflation, but for the Government of Quebec, it is abundance: the $6.45 billion deficit forecast in the Girard budget last March has practically disappeared thanks to an increase marked by tax revenues, reveals the pre-election report of the Ministry of Finance.
Posted at 10:03 a.m.
According to this report, audited by the Auditor General of Quebec Guylaine Leclerc and presented on Monday, the deficit forecast for 2022-2023 after a payment of 3.4 billion to the Generations Fund is only 700 million. And in fact, the province will find the way to a balanced budget with a surplus of 1.7 billion before this payment, notes Mme Leclerc. And this is essentially explained by a significant increase in the state’s own-source revenue.
In a word, it is abundance. Quebec citizens will pay $2.3 billion more in taxes than Minister Girard predicted last March. Companies: 1 billion. And on the tax side, the state will reap 639 million more than expected. In total, Québec’s own-source revenue will be $4.7 billion higher. And state corporations should bring in an additional $579 million to the public treasury.
PHOTO EDOUARD PLANTE-FRECHETTE, LA PRESSE ARCHIVES
The strong increase in the government’s consolidated revenue “is essentially due to the effects of rising inflation and the resumption of economic activity,” says Quebec Auditor General Guylaine Leclerc.
The Auditor General is clear: this improvement cannot be explained by greater productivity of Quebec businesses. Real GDP is weaker than expected by the Ministry of Finance in 2020. The strong increase in the government’s consolidated revenues “is mainly due to the effects of rising inflation and the recovery of economic activity”, says -she.
Plausible predictions
Since 2015, the Minister of Finance has been responsible for preparing and publishing a report on the state of Québec’s public finances before each general election. This pre-election report must contain an update of the economic and financial forecasts for Québec published in the government’s most recent budget. This report is then certified by the Auditor General of Quebec.
In this case, the VG team, which has had the documents in hand since the beginning of June, believes that the document holds up and that the forecasts are generally “plausible”.
It is this document that will serve as a basis for the financial executives of the political parties who will be campaigning in nearly two weeks, and who will try to find a way to finance their electoral promises.
Recession risk
But even if the Government of Quebec garners much more revenue than expected, that does not mean that there are no dark clouds. Given the “very high level of uncertainty about the economic situation”, the AG deems “relevant” the inclusion in the financial framework of provisions for economic risks of 2 billion in 2023-2024 and 1.85 billion in 2024 -2025.
The AG recalled that the Bank of Canada suggested on July 13 “to raise its key rate by 100 basis points, that inflation could persist longer than expected and that the tightening of monetary policy will continue as long as it does not will not return to its target,” she notes.
But if “the economic risks do not materialize”, there “is a possibility that the surplus for the purposes of the government’s consolidated financial statements will be higher than expected and that the deficit in the budgetary balance will improve accordingly”. Without a recession, Québec’s budgetary balance could be positive as early as 2023-2024. The expression “structural deficit” is not found in the pre-electoral report, notes the VG team.