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The CAQ government has promised to restore order to public finances, but has remained evasive on the procedure to follow until now. On Thursday, the Minister of Finance, Eric Girard, will present his economic and financial update. Will he lay the foundations of his plan to return to budget balance, which he has committed to presenting next spring? Here are some keys to sorting it all out.
Deficits on the horizon
The return to balanced budgets has disappeared from the radar in Quebec. In his budget presented last March, Minister Girard announced a deficit of 11 billion Canadian dollars for the current year. It should gradually decrease to 3.9 billion in 2028-2029. Mr. Girard also promised that a new plan to return to zero deficit would be tabled a year later, and that this return would take place “at the latest” in 2029-2030.
It was then quite a contrast with the portrait drawn up during the update of the previous fall, in November 2023, where there was talk of a deficit of only 3 billion and a return to balance from 2027 -2028.
As of June 30, the Quebec government was still heading towards a deficit of 11 billion out of 148 billion in portfolio spending and 10 billion in debt payment, Quebec reported last month in a quarterly report on its financial situation. This shortfall, however, included a contribution of 2.2 billion to the Generations Fund as well as a small reserve in the event of unforeseen events (provision for contingencies) of 1.5 billion.
Economic rebound, Trump…
On the income side, Quebec already saw this summer that we were going to benefit from a modest rebound in the economy after a year of stagnation in 2023, in addition to new measures from the federal government, including the increase in tax on income in capital. On the spending side, we expected to pay the price for the terrible floods of the summer, as well as interest rates on the debt higher than expected despite their recent reduction by the Bank of Canada following the decline in inflation.
The return of Donald Trump to the White House could also darken Eric Girard’s economic forecasts. The re-election of such a protectionist president risks harming Quebec’s economy, declared Prime Minister François Legault the day after the American’s victory. “Jobs are at stake,” he said, particularly in the aeronautics, forestry products, aluminum and food products sectors.
But it could also be good, added his Minister of Finance. “We see that the financial markets appreciate the aspects relating to deregulation, tax cuts… All of this could stimulate economic growth. »
Possible savings and emergencies
The Legault government’s promise to present a plan to return to budget balance at the same time as its 2025-2026 budget was accompanied by the commitment to carry out a major review of all of the numerous tax credits and other tax and budgetary measures intended for individuals and businesses. If we are already prepared, it is possible that certain changes will be announced in this week’s budget update, indicated the office of the Minister of Finance. Quebec expects to generate savings of 1 billion over five years from this exercise.
On the other hand, social groups urged the government last week to do more in the face of the deterioration of the living conditions of the most vulnerable. “We are experiencing a social crisis in Quebec,” said a spokesperson. “Homelessness is visible everywhere. Families find themselves on the streets, workers find themselves asking for food aid. »
Recruitment freeze
In the meantime, Quebec has announced a freeze on the recruitment of new employees in the public service, with several exceptions. Establishments in the health and education networks and some state-owned companies, including Hydro-Québec, are notably exempt from this measure.
The aim of the operation is to “slow down the growth in the number of employees in the public service” and thus to “respect the budgets allocated for the current year”, explained the Secretariat of the Treasury Board last month.
The freeze, in force since 1is last November, is decried by public sector employee unions, who see it as the start of a return to the years of liberal “austerity” and who believe that it will lead to a deterioration of services to the population. Quebec, however, justifies itself by having to “optimize” public spending.
