QUEBEC TO POST $14.9B DEFICIT
Coronavirus has ravaged our economy
QUEBEC The province is headed for a staggering, historic deficit of $14.9 billion for 2020-2021 as a result of the ravages of the COVID -19 pandemic on public finances.
In an economic update tabled Friday, Finance Minister Eric Girard said Quebec has been “hit hard” by the 100-day pandemic, forcing the province to spend massive amounts on health and relief measures for people in confinement and businesses that were forced to close.
At the same time, its revenues — from taxes and other fees — have plunged by $8.5 billion as the economy ground to a halt, creating a perfect storm nobody saw coming.
While Girard was projecting a balanced exercise for the year in his March 10 budget, Friday’s update says Quebec’s projected deficit will be $14.9 billion, the biggest in the province’s history — even higher than in wartime.
The $14.9-billion deficit includes a $4-billion provision to mitigate further potential economic and health risks related to a possible second wave.
Girard, who described his update as a snapshot of Quebec’s finances in a chaotic time, revealed he does not anticipate being able to balance the books for the next five years.
He insisted, however, that the return to balanced books can be achieved without major austerity measures or tax increases.
“The sales tax, income taxes and corporate taxes will not increase,” Girard said at a news conference where he released the update. “Quebecers are already taxed enough.”
In the update, Girard said the pandemic has cost Quebec $6.6 billion so far. The province has spent $3.7 billion extra on health, including $2.3 billion on “crisis priced” protective equipment such as gowns, surgical masks, N95 masks, visors and hand sanitizers to protect workers from the virus.
Another $200 million is being spent to attain a daily tally of 20,000 COVID-19 tests. Quebec has yet to reach that goal. A total of $878 million is going for temporary wage increases of workers.
Overall, Quebec’s health and social services budget will soar to $51.3 billion, which is $3.5 billion more than was planned last March.
Another $1 billion has gone toward support for individuals, plus another $2 billion to mitigate the economic impact.
Quebec has burned through its $14.9-billion stabilization fund for emergencies, which means the money it is spending on COVID -19 is going directly on to the deficit to be added to Quebec’s overall debt. The debt will increase by $22.9 billion for a new total of $222 billion.
In the March budget, Quebec had estimated it would hit its goal of reducing the debt to 45 per cent of gross domestic product (GDP) this year, three years sooner than planned. Now all bets are off with the debt roaring back to life, to 50.4 per cent of GDP as of March 31, 2021.
Under the circumstances, Girard said Quebec may have to re-examine legislation that sets out debt reduction targets until 2025-2026 to take the “new normal” into account.
Girard, who has already said he expects Quebec to experience the worst economic recession since the Second World War, also tossed his March 10 economic growth forecasts out the window.
Instead of two-per-cent growth for 2020-2021, Girard says the GDP will contract by 6.5 per cent, a consequence of the fact 40 per cent of the economy has been shut down since March.
Girard predicts a swift rebound out of the hole with 6.0-per-cent growth in 2021. A sports buff, Girard described this as the “Nike swoosh,” a reference to the company’s logo.
A total of 820,500 jobs have been lost, raising the unemployment rate from 4.5 to 17 per cent between February and April. With the reopening of some of the economy in May, the unemployment rate fell to 13.7 per cent.
Girard said he thinks Quebec can get itself back on track because the pandemic spending is temporary and the government is dedicated to improving the economy.
“This is the best estimate that we can give you right now,” Girard said.
Asked how he feels to have a historic deficit emerge on his watch as minister, Girard was philosophical.
“It’s a stewardship role,” he said. “It’s a difficult period, but we have an excellent team.”
But Québec solidaire opposition MNA Vincent Marissal said the update is “indecent” because the Coalition Avenir Québec government’s priority is balancing the budget instead of helping people.
Liberal Leader Dominique Anglade said in a tweet that the government missed a chance to come to the aid of small- and medium-sized businesses through a direct aid program.