(Quebec) The probability of a recession hitting Quebec is on the rise and has now reached 50%, warns Premier François Legault. The official opposition is calling for an “emergency budget” to be tabled before the election.
Posted at 1:34 p.m.
Updated at 8:11 p.m.
What is a recession?
A recession is a decline in economic activity, measured by gross domestic product, for at least two consecutive quarters. It is characterized by a significant increase in the unemployment rate and a marked drop in consumption and investment that can last a few months or several years.
“I think we may be at 50-50. By increasing interest rates, it makes business investments less attractive, there is a risk of slowing down the economy, economic growth, ”said Mr. Legault during a press briefing broadcast on TVA on the sidelines. of a tour on the North Shore.
Mr. Legault is more pessimistic than his Minister of Finance Eric Girard, who rather estimates that “the probability of a recession is around 35%”. He made this estimate during the day. In March, the chances of a decline in Quebec economic activity were estimated at 25% by Mr. Girard and forecasters from the Department of Finance.
“There has been a synchronized rebound in the global economy and that brings inflationary pressures. Central banks raise interest rates to tighten monetary conditions. At the same time, financial assets react, and that will slow down the economy,” explained Mr. Girard. However, he was more reassuring than the Prime Minister. “The most likely scenario for 2023 is not a recession. […] there is twice the chance that we will have good growth in 2023,” he stressed.
The Minister of Finance stresses that he will know more at the end of the year. This is when we will be able to know if the Bank of Canada’s interest rate hike will succeed in slowing inflation. If this scenario materializes, “it will enable us to avoid a recession”, he indicated.
Inflation
His colleague Minister of Energy, Jonatan Julien, said for his part that many citizens are worried about the economic situation. “We are discussing it, in fact, about inflation, the cost of living. We live it, we are not disembodied from it. We talk about it everywhere we go, ”he admitted.
“I am not an economist, I am an accountant, but we see things going. We see the Bank of Canada raising its rates and announcing further rate increases. This will necessarily have a beneficial effect on inflation, but will have perverse effects on the cost of mortgages,” added Mr. Julien.
The PLQ calls for an emergency budget
Liberal MP Carlos Leitão is asking for an “emergency budget” to deal with the economic situation, which he considers critical. “We must act now in anticipation of this recession or this sharp slowdown that is coming,” he said in an interview.
Photo Édouard Plante-Fréchette, LA PRESSE archives
Liberal MP Carlos Leitão
Mr. Leitão believes that Minister Girard has all the data from the public accounts that allow him to know that the anticipated deficit is lower than expected and that he has “the means to act”. The former Minister of Finance, who will not seek a new mandate, knows very well what he would do if he were in charge of Finance.
He would immediately lower Quebecers’ taxes to “help families’ budgets now” and he would increase the allowance for seniors. It would also put forward labor retention measures.
“The risk of recession is very real, it is time for Mr. Girard to admit it. The probability of recession increases, inflation increases, and the central banks, we see it today with the American Federal Reserve, raise their interest rates”, he says.
It is inevitable, he said, that this rate hike will slow down the Quebec economy. “For everyday life, even if there is not technically a recession, there will be a sudden and rapid downturn in the economy, accompanied by a rise in inflation. People will feel more and more stuck by these two factors which will put pressure on the family budget. It’s not pleasant at all,” Mr. Leitão added.