Quebec Finance Minister Eric Girard has cut his projections for the province’s economic growth in 2024 and warned that Canada has entered a period of economic “stagnation.”
The next six months will be difficult due to high inflation and interest rates, Mr. Girard said on Nov. 7 after releasing his economic update. To help Quebecers cope with the rising cost of living, the government is increasing certain tax credits and social benefits above the rate of inflation forecast for year, he told a news conference.
“Inflation has come down but it’s still high, interest rates went from zero to five percent, we have two wars, it’s very difficult right now,” he told reporters in Quebec City. “The fourth quarter of 2023, the first quarter of 2024, this is going to be a difficult six-month period.”
Tax credits and government benefits will rise by 5.08 percent starting Jan. 1, 2024, above the 2.71-percent inflation rate he forecast for the coming year. The government predicts that inflation will clock in at 4.63 percent in 2023.
Quebec’s economy shrunk by 0.5 percent in the second quarter of 2023, but Mr. Girard said he doesn’t expect a recession and maintained his economic growth forecast for the year at 0.6 percent. However, he said he cut his economic growth forecast for 2024—to 0.7 percent from the 1.4 percent he had estimated in the March budget.
The situation isn’t better in the rest of the country. Data for the Canadian economy shows that in the seven-month period ending Sept. 30, there were six months without growth or with economic contractions.
Mr. Girard said the country’s economy has not entered a recession—usually defined as two consecutive quarters of negative growth—and that other indicators, such as the labour market, consumer confidence and production of goods and services, remain stronger than would be expected in a recession.
“We’re not witnessing the behaviour that’s associated with a recession, but we’re also not witnessing growth, we’re oscillating around zero-per-cent growth,” he said, adding that he describes the situation as economic “stagnation.”
His update says Quebec government revenues will be around $144.3 billion for the current fiscal year—around $800 million less than forecast in the spring budget; spending will be around $147.4 billion, approximately $600 million more than forecast.
Quebec’s operating deficit will be just over $3 billion—up from an estimated deficit of $1.67 billion in the spring budget. That will rise to more than $6.1 billion after the government makes payments to a fund dedicated to reducing the province’s long-term debt.
Mr. Girard has maintained his plan to balance the books by the 2025-26 fiscal year. But when the legally required payments to the debt fund are considered, the budget won’t be balanced until the 2027-28 fiscal year.
According to the update, personal income tax revenue was lower than expected in the March budget, as were federal transfer payments, particularly those related to infrastructure. Spending on health and social services, as well as on education, was higher than forecast in March.
The economic update includes $1.8 billion over five years to build 8,000 social and affordable housing units, the cost for half of which will be paid by the federal government. Mr. Girard said 500 of those units will be for people who are experiencing homelessness.
Also in the update is $124 million over five years to fight the rise in homelessness, as well as $21 million this year for food banks.
There will also be $400 million over five years related to the historic forest fires last summer. The money includes funding for reforestation, affected communities, the forestry industry and the province’s forest fire fighting service.
Mr. Girard delivered his update one day after public sector workers, including in the education and health and social services sectors, walked off the job for several hours – the first walkout in a series of scheduled strikes.
He said the government’s latest offer—a roughly 10.3-percent salary increase over five years, along with a one-time $1,000 payment and further increases for some workers—fits within the budget. But any additional spending on public sector workers, he warned, “will require borrowing.”
