Quebec deficit shrinks as province shows strong pandemic rebound

Quebec's economic future is brighter than expected as the post-pandemic deficit is about $5 billion less than expected, and the government says it will use the extra cash to invest in health care, pay low-income Quebecers a cost-of-living allowance, and create incentives to combat the labour shortage. 

Quebec announces $10.7B in spending toward cost of living, health care, daycare, labour shortage

Quebec Finance Minister Eric Girard announced $10.7 billion in new spending Thursday. (Sylvain Roy Roussel/CBC)

Quebec's economic future is brighter than expected with the post-pandemic deficit expected to be $6.8 billion for this fiscal year — about $5.4 billion less than forecast in March — according to the government's latest economic update.

Finance Minister Eric Girard presented the update, saying the government will use the extra cash to invest in health care, create incentives to combat the labour shortage, as well as offset daycare costs and the impact of inflation on low-income people.

Girard announced an additional $10.7 billion in additional spending over the next five years, since the March 2021 budget, bringing total investments announced this year to $13 billion. 

"The year 2021 is a year of exceptional growth,'' he told reporters in Quebec City.

"Quebec growth is going to outpace U.S., Canada, the world average. So this is giving us means. It's giving us $6 billion over the horizon of the financial framework."

Girard said Quebec's response to the pandemic was part of that recovery.

"Because of our high vaccination rate, because we respected the rules, this allowed us to open the economy and perform well."

But the update also gave a clearer picture of just how much the pandemic has cost the Quebec economy.

So far, the government has spent $7.6 billion on pandemic response and is expecting to spend another $6 billion in 2021-22.

In all, COVID-19 will likely cost Quebecers as much as $17.3 billion, according to the update as spending is expected to continue until 2026, including financial incentives tied to recovery, as well as nurse-retention bonuses. 

Girard said Quebec's economy is recovering more quickly than expected from pandemic restrictions and lockdowns.

Just one year ago, Quebec reported a historic deficit of $15 billion. 

Economic growth in the province is forecast to reach 6.5 per cent this year, 2.3 per cent more than anticipated in March. 

Girard says Quebec is still on target to balance its budget in 2027-2028, a goal set last spring.

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$2.9 billion to train and attract workers

But a crippling labour shortage and sharp inflation could slow that economic growth — and be hard on Quebecers with lower incomes. 

Ahead of the economic update — which Premier François Legault called a "mini-budget" — business groups pleaded with Girard to address that labour shortage, calling on the government to find ways to retain older skilled workers, as well as to boost immigration to the province. 

The Coalition Avenir Québec government's update dedicates $2.9 billion toward training and attracting workers in education, engineering, health and social services, childcare, information technologies and construction. 

The measures fall short of increasing immigration, though, which the business groups say is a key long-term solution. 

Employees work on the SeaDoo assembly line at the Bombardier Recreational Products plant on June 12, 2014. The manufacturing PMI in Canada was lower in January, though still in positive territory. (Ryan Remiorz/Canadian Press)

Overall, Quebec has about 200,000 vacant positions across the economy. Girard says the new incentives aim to requalify and attract 170,000 workers.

Business leaders were puzzled when the CAQ government slashed the number of immigrants by 20 per cent when it was first elected in 2018, just as the labour shortage was beginning to hurt.

In 2019 about 40,000 new immigrants were allowed in, down from 50,000.

Last month, the provincial Immigration Ministry increased the target back to about 50,000, and promised to process thousands more applications that were backlogged in the system.

Véronique Proulx, CEO of the Quebec Manufacturers and Exporters Association, said revising that target to 70,000 would be ideal to make up for the shortage. 

Proulx estimates manufacturers in the province have lost $18 billion over the last two years due to the shortage.

Liberal finance critic Carlos Leitao told reporters his main issue with the update was what it didn't contain.

"In our opinion, the major absence in this economic and fiscal update is that there is absolutely nothing about climate change,'' he told reporters in Quebec City.

Leitao said the one-time payments are insufficient and that they should be reoccurring. The government's plan to address Quebec's labour shortage, he added, reflects short-term thinking and doesn't account for the province's aging population.

Allowances to offset higher costs of living and childcare

The inflation rate, which has reached four per cent, is another factor that could slow Quebec's economic growth. 

Girard announced an allowance for more than three million low- and middle-income Quebecers in 2022. Couples will receive $400 and people living alone $275. An investment of $2.1 billion over five years will cover the cost, Girard said. 

He also announced an increase in senior assistance for Quebecers age 70 and up, bringing it to a maximum of $400 per person starting this year.

The government will also enhance the refundable tax credit for child-care expenses, with the aim of reducing the daily cost of non-subsidized daycare from about $40 to one similar to subsidized child care — about $8.50 per day. 

The adjustment is expected to cost the government $1.1 billion over five years and save families with an income of between $60,000 and $100,000 up to $1,310 per year. About 385,000 families are expected to see their costs reduced as a result.

Girard's budget update also promises to spend $800 million to reduce the waiting list for surgeries.

Other spending in the $10.7 billion includes $304.4 million toward improving access to housing, with 2,200 new affordable housing units, $232 million to prevent domestic violence and support victims, $150 million to launch a provincial strategy to prevent firearms-related violence. 

As well, $21 million is being invested to fight racism and discrimination and $17 million to promote sports and recreational activities for youth. 

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With files from Cathy Senay, Steve Rukavina and The Canadian Press