The measures promised by the government of François Legault to fight inflation will cost the Quebec state $13.2 billion, which is preparing to face significant economic stagnation in 2023 – perhaps even a recession.
Finance Minister Eric Girard tabled his most recent economic and budgetary update on Thursday, a document of less than 200 pages composed largely of measures to “deal with the rising cost of living”. These account for 95% of new government spending announced.
As 2023 approaches, Quebec’s big moneymaker is substantially reviewing its future economic outlook. Estimated at 3.1% in 2022, real GDP growth should drop to 0.7% next year. “This is a significant downward revision compared to the March 2022 forecast, when growth of 2.0% was expected in 2023,” noted Minister Girard in a press release.
On Wednesday, the Bank of Canada raised its key rate to 4.25%. This is the highest level reached by this indicator since 2008, a year of recession in Canada. In the context, Quebec does not add measures to its “anti-inflation shield” promised in the election campaign.
If the rosiest economic scenario speaks of “stagnation”, the government does not exclude either that Quebec enters a recession. In an “alternative scenario” presented in his update, Eric Girard evokes a “shock” that would cause Quebec’s real GDP to decrease by one percentage point in 2023. This economic relapse would have the effect of pulling Quebec’s deficit towards the bottom between 2023 and 2026.
The Ministère des Finances anticipates a budget shortfall of $5.2 billion for the 2022-2023 fiscal year, mainly caused by the payment of end-of-year checks to Quebecers and the enhancement of the tax credit for the support of elders. After modifying the Act to postpone it, Quebec still considers that “the return to a balanced budget [se fera] by 2027-2028”.
A shield at 5.1 billion for year one
Quebec has been increasing one-off aid measures since the start of the year. In the spring, three-quarters of Quebecers received a payment of $500 to offset the rise in the cost of living. Millions of taxpayers will in the coming days receive — or have already received — a second check for up to $600, this time.
In its anti-inflation shield, which was repeatedly touted during the election campaign, the Coalition avenir Québec also pledged to improve the tax credit for support for seniors. Thing promised, thing due: seniors aged 70 and over living alone and earning less than $64,195 will have access to amounts of up to $2,000 per year. Nearly 400,000 additional people will have access to it.
In all, this measure will cost the Quebec Treasury $8 billion.
With Florence Morin-Martel
Further details will follow.