One might be discouraged when reading this budget and think that Quebec has been falling into a deficit era for seven years with its austerity and tax increase. I have a completely different opinion.
The government is making a wise decision to postpone the success of the balanced budget by two years, which will take some time for us to breathe.
In addition, Minister Eric Girard pressed the right buttons to address some important financial issues. The same can be said for requesting a pandemic-affected workforce, injecting funds to train more IT professionals, or measures aimed at encouraging immigration to areas and identifying their skills.
Above all, I see that this budget has some good news in context. Here are four.
1— Tax revenues increase!
First, would you believe me if I told you that personal income tax revenues have not fallen this year despite the biggest recession in the modern age?
However this is the case. In fact, according to the Gibard budget, Quebecs paid 4.1% more tax on their income to the Quebec government than the previous year, or 4 1.4 billion. And it’s not because tax rates have risen, but because their incomes are higher.
Yes, in fact, this phenomenon is largely explained by the federal relief efforts for people like the famous PCU1It increased the revenues of individuals and thus increased the revenues to the government by 1.8 billion. Similarly, without these measures, personal income would fall by 1.1%, which is 4.0% of the nominal GDP contraction.
I did worse than expected.
2— The deficit is smaller than expected
More good news: The deficit for the fiscal year ending March 31 is lower than expected. All in all, it’s not 15 billion – before reserve use – but 12 billion, which is substantial.
This number is still 15 billion in the budget documents, because the government has decided to charge for the year ending with the weekly expenses announced by the government and usually for the year entered.
This amounts to a total of $ 1 billion, in the case of some funds linked to other measures to connect Quebecars with high-speed Internet and improve productivity.
Quebec has set a provision for financial losses of $ 1.3 billion for the current year, if expenses and final income tax and upcoming weeks taxes differ from forecasts.
In short, the year was worse than expected, which allowed the government to put more money into health care, especially in the middle of the year.
3— The debt / GDP ratio is stable
The third good news: Quebec finds itself today in a similar financial situation to the federal government before the epidemic, despite the coming deficits.
Sorry? Yes, according to budget estimates, Quebec’s net debt will remain stable over the size of the economy over the next few years, reaching an annual deficit of $ 7 billion.
In fact, net debt is expected to rise by about 5 points this year to 45% of GDP, before stabilizing at that level, even uming the deficit. This stability will increase rapidly as our GDP, at the denominator of the equation, increases our debt through new deficits.
This is the public finance management strategy adopted by the Trudeau government before the epidemic, the economy is in full swing. Quebec’s economy will be in a similar situation for seven years, and the Quebec government wants to return to a balanced budget and therefore reduce the debt / GDP ratio to 41% in the end. Some exercise.
In comparison, the pandemic boosted Ontario’s net debt by 9.2 points in two years, to 49.6 percent of GDP by March 31, 2022, and 45.5 percent to 5.5 percent in Quebec. At this point, the federal government is dropping from 35% to 55%!
4— The private sector makes good plans
Finally, the fourth good news: government financial planning is based on prudent financial indications, which are higher than the private sector.
According to the Quebec Estimate, the economy will grow by 4.4% year-on-year over the next five years (2.6% after inflation), which is 0.5 points lower than the average private sector estimate of 4.9%.
If we redesign the budget with the average estimates of the private sector, the deficit will be reduced by 30% or 2 billion by the 5th year.
This is known as the cushion, which will reduce the deficit from $ 6.5 billion to $ 4.0 billion in the fifth year, making it possible to balance the budget without drastic measures.
When the coronavirus restricted Quebec a year ago, I was the worst for Quebec’s economy. Aren’t you
1. Acronym for Canadian Emergency Benefit