Pandemic thrusts Quebec into record $14.9 billion deficit, could take five years to balance books again
MONTREAL -- The first three months of the COVID-19 pandemic have battered Quebec's books, Finance Minister Eric Girard announced Friday, and it could take the province years to bounce back from "an unprecedented shock to the economy."
Girard delivered an update on how the pandemic impacted Quebec's finances, and the numbers are grim: Quebec estimates that its deficit will reach a record $14.9 billion for the 2020-2021 fiscal year, and the government said it could take up to five years to balance its books again. That return to budgetary equilibrium "will not be achieved at the expense of public services or by increasing Quebecers’ tax burden," the government pledged.
The first few months of the pandemic in Quebec also took a huge bite out of the province's productivity (GDP), which is expected to contract by 6.5 per cent in 2020; that is the biggest downturn since the compilation of such statistics began in 1981. (Quebec's budget had estimated a 2 per cent increase in GDP for the year). Girard said the province hopes to return to its pre-pandemic levels of productivity by the end of 2021.
Girard said that Quebec spent some $6.6 billion in just the first few weeks of the pandemic to shore up the province's health care system, provide economic relief to Quebecers and otherwise mitigate the economic effects of the public health crisis. That amount is more than the province spent over two years to counteract the 2008-2009 global financial crisis, Girard noted.
“The last few months haven’t been easy and we still have a great deal of work to do, but I’m convinced that we will be able to prepare a post-COVID-19 future where Québec and its economy will recover the vitality and momentum that characterized it only a few weeks ago," Girard said, noting that the province will present another economic update in the fall.
But despite the immediate gloomy economic forecast, Girard said the recovery has already started and he expects the province will come out of the COVID-19 crisis with a 6 per cent jump in GDP next year.
"We don't know what's ahead of us in the fall," Girard told reporters in Quebec City, referring to a possible second wave of COVID-19. "But we can already say that June is better than May and May was better than April."
The finance minister also reiterated his government's promise that taxes won't go up -- on individuals or on companies -- to help bring the province back to budgetary balance. "Quebecers are already sufficiently taxed" he said.
Girard's March budget included a $14-billion financing program to stimulate the economy with infrastructure projects. Now, with a $14.9 billion deficit, the province will be borrowing more than $30 billion this year alone.
However, Girard said Quebec has a "credible plan" to balance the budget in five years and a strong track record of sound fiscal management that he said is appreciated by investors who will be buying the province's debt.
"We have the capacity to face a second wave," he said. Quebec responded to the pandemic by injecting $3.7 billion in the health sector, as well as $1 billion to help workers and another $2 billion for companies.
The deficit for fiscal 2020-21 includes a $4-billion contingency fund as well as a $2.6-billion payment to a fund dedicated to paying down the provincial debt, which will stand at just below $200 billion in 2020.
Debt-to-GDP had been decreasing for years and was at 43 per cent at the end of March, but has since ballooned and will reach 50.4 per cent in 2021. Quebec created 77,700 jobs in 2019, and the unemployment rate was 5.1 per cent.
But in February and April alone, the province lost more than 800,000 jobs and unemployment skyrocketed to 17 per cent.
As the province opened up from the pandemic-induced shutdowns, however, about 231,000 jobs returned in May and the unemployment rate fell to 13.7 per cent.
- The Canadian Press contributed to this report