Québec's mini-budget: findings and analysis
On November 25, 2021, Finance Minister Éric Girard provided an update on Québec's economic and financial situation by presenting an economic update under the theme A Québec Fit for the Future.
Here are the highlights of this economic update:
- Government spending for 2021-2022 is estimated at $126.7 billion;
- Revenues are projected at $131.1 billion;
- The anticipated deficit for 2021-22 is $7.5 billion after a $3.3 billion payment to the Generations Fund, which is the province's investment fund.
This economic update focuses primarily on the two major challenges facing Québec businesses and households: inflation, which is expected to reach 4.4% in Québec in 2021-2022, and the labour shortage.
In this regard, the Minister of Finance has announced targeted measures, including
- A $215 million increase in the tax credit for child care expenses;
- A one-time benefit for 3.3 million low- and middle-income individuals of $400 per couple or $275 for a single person;
- An additional $200 in tax assistance for low-income seniors aged 70 and over;
- Construction of up to 2,200 new affordable housing units;
- Investments totaling $2.9 billion over five years to train, retrain and attract nearly 170,000 workers in five areas: Health and Social Services ($953 million), Education ($551 million), Early Childhood Education and Care ($213 million), Engineering and Information Technology ($1.1 billion) and Construction ($70 million);
- Measures totaling $444 million to accelerate business growth and productivity.
The total projected deficit is $7.5 billion, down almost 50% from previous estimates, largely due to the effects of the stronger than expected economic recovery. The structural deficit (deficit that will not be eliminated with the expected economic recovery) is $4 billion, also down.
Québec is reiterating its intention to return to a balanced budget for the 2027-2028 fiscal year, without however clearly identifying, for the moment at least, the concrete means that will be implemented to achieve this. One thing is certain: the economic update presented by Quebec does not foresee any tax increase for individuals and corporations, in line with the Minister's previous commitments.
Québec is also raising its economic growth forecast from 4.2% in last March's budget to 6.5% in today's economic update, reflecting a stronger than expected economic recovery.
The total costs of the COVID-19 pandemic in Québec, including expenses and lost revenues, are now close to $17 billion for the Québec government.
Québec is in better fiscal shape than most other provinces in the country. And that's without mentioning the federal government's chronic deficit situation. Today, the Québec government has decided to reinvest in two of its fundamental missions: health and education.
As for investments in economic development, they are rare, as the government believes that the current situation is looking good and that unemployment is strongly on the decline. The money announced to support the less fortunate will have a positive impact on small businesses (restaurants, convenience stores, retail stores) by increasing the disposable income of more than 3 million people temporarily. The effect on inflation, on the other hand, is likely to be rather negative and will maintain the overheating rather than calm it down. As we saw in Alberta some 20 years ago, direct cheques are not a substitute for long-term structural economic development programs.
When it comes to labour shortages, measures are few and far between. Investments in training are sound, but in too few sectors to make a real difference in the long term. Service sector jobs are heavily neglected, as is manufacturing.
We understand that more significant measures will certainly be presented in next spring's budget, but the government's current leeway could have been used more to promote the employability of Quebecers. The immigration component has not been addressed either and the demographic challenge
Nonetheless, the government's economic team is to be commended for emerging from the COVID-19 pandemic with Québec’s economic structure relatively intact. What's more, with a province that is stronger than its immediate neighbors in March 2020. Québec has all the assets to succeed in an increasingly competitive world, but it must improve its immigration policies, support its manufacturing sector and its SMEs, and manage its public finances tightly.
Today's update is a prelude to the directions that will emerge in the final year of this government's mandate. We are confident that even better days are ahead, provided we can collectively better plan for the long term and let businesses and other economic development actors play their full role.
Boudeweel Public Affairs