(Quebec) “Deficits are going to be higher,” warns Finance Minister Eric Girard, as he prepares to postpone a return to a balanced budget. A stagnant economy is causing state revenues to fall, while higher-than-expected salaries granted to state employees are driving up spending.
“This is mathematics: at this stage, the deficits will be high,” admitted Legault, the government's chief financier, in Sherbrooke on Thursday, during a meeting of the CAQ caucus to prepare for the resumption of work in the National Assembly in January 30.
He declined for the first time to reiterate his goal of returning to a balanced budget in 2027-2028. “I'll give you the facts: I told you that the fact that the economy is stagnant puts pressure on revenues, that negotiations in the public sector put material pressure on spending and that has an impact,” he replied. . So the minister suggests that zero deficit should be postponed again. He said that everything will be revealed in the budget.
An important change in the economic framework took place during the holidays with the in-principle agreement with the Inter-Union Common Front. Quebec has agreed to a 17.4% salary increase over five years. Salaries for 600,000 workers will rise by 8.8% this year – taking into account the 6% increase granted for 2023 and the 2.8% increase that applies to 1.er April
In November, Mr. Girard agreed. He predicted a 10.3% salary increase over five years.
The minister is reluctant to quantify the impact on state spending at the moment, but we do know that each per cent increase costs around 600 million a year. Thus the gap between forecast and reality is billions of recurring dollars per year. Mr. Girard organized. “We are already in a deficit situation and as a result these additional costs will put additional pressure on the fiscal framework of the Quebec government. »
They also fall into “difficult times,” he noted. “The economy is slowing down, we are in a period of stagnation, we have pressure on income. »
In late December, it became official: Quebec is in a technical recession — two consecutive quarters of decline in gross domestic product. Eric Girard prefers to talk about stagnation as long as the decline is limited to 0.8% in the third quarter of 2023.
In the fourth quarter, the news wasn't much better. Mr. According to Girard, if real GDP rose slightly by 0.3% or 0.4% in September and October, we should expect a more gloomy picture in December due to strikes. “We don't have generalized weakness, but we have an economy that, when we put all the pieces together, is stalling. No growth,” Mr. Girard said.
In mid-December, Eric Girard revised his forecasts further downward. Just a month and a half after its fiscal update, the government's fiscal framework for the current year actually declined by $635 million due to a significant drop in expected revenue. The minister offset a good part of this revision by using his entire contingency allocation of 500 million.
The result: Quebec no longer has a cushion for unexpected events, and the projected deficit has grown to 4.1 billion — after paying into the intergenerational fund, which will be used to reduce the debt burden. And all this was announced before the in-principle agreement on salary hikes for state employees was concluded.
According to the minister, the first cuts in the Bank of Canada's key rate “will come in the spring or early summer, allowing the economy to recover in the second half of 2024”.
Furthermore, Eric Girard confirmed that the deadline for receiving the one-time amount for the cost of living, from $400 to $600 announced at the end of 2022, is being extended to June 30. To get this check, you must file your 2021 income tax return no later than June 30, 2023. 65,000 people who were eligible for financial aid did not. He grants them extra time.
The opposition responds
Government plays a major role in promoting economic growth. […] It is disturbing to note this failure by the Finance Minister this morning. At least he has some clarity.
Marc Tanguay is the interim leader of the Liberal Party of Quebec
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