Quebec finance minister says 'return to growth' coming as COVID-19 leads to historic deficit
Government is projecting a $15B deficit for the 2020-2021 fiscal year
Quebec Finance Minister Eric Girard says that while the province is living through an unprecedented crisis, the economy should rebound by the end of 2021.
The government is projecting a record $14.9-billion deficit for the fiscal year, having spent $6.6 billion on recovery efforts and having lost revenue due to decreased consumer spending and export demand.
The COVID-19 pandemic has roiled the global economy, and Quebec was not spared. Nearly every business in the province was shuttered at the end of March.
"We don't know what is ahead of us," Girard said at a news conference Friday morning to outline the state of the province's economy.
But he said that the spending on aid and loss of revenue is only temporary, and pointed out Quebec's economy was in good shape before the crisis.
Between February and May, Quebec lost 589,600 jobs, and GDP in the province is expected to contract by 6.5 per cent this year.
Girard forecasts that GDP will rebound six per cent in 2021. However, the recovery will be uneven: the report says that the restaurant and tourism sectors, in particular, will prevent the province from attaining its pre-pandemic employment levels in the short term.
"We are doing everything that we can to improve potential growth," he said, such as fast-tracking infrastructure projects and maintaining tax credits for business innovation.
The report says the government's financial aid so far has freed up $28 billion for Quebecers and Quebec businesses.
Premier François Legault said at a news conference Friday afternoon that the government is counting on an economic revival to get out of the budgetary hole caused by the pandemic.
"There is no question of cutting spending; there is no question of raising taxes," Legault said.
The situation remains dire for many of the province's businesses, especially those which rely on close contact. Restaurant owners have to decide whether to close up shop or try to work at a reduced capacity — and there is still no timeline for when bars can reopen.
Simon Dunn says take-out service at the Little Burgundy restaurant he opened last year, Le Fricot, is serving as a lifeline for his bar, Drinkerie Ste. Cunégonde, next door to the restaurant, that has been serving drinks for nearly a decade.
"It's putting out fires, but it's not generating enough revenue to continue going with the rent that we have … all the bills that come in," he said.
"At least give [bars] the tools to stay open. Because they're going to kill most of them."
$4B more for COVID-19 relief
With the severity of a second wave of infections this fall still uncertain, the government is budgeting $4 billion in additional aid for Quebecers and businesses.
Girard said the government will be watching to see how the economy fares in the next several months to determine what kind of aid will be needed. He said the province has enough protective equipment and screening tests to make it through a second wave.
Norma Kozhaya, vice-president of research and chief economist with Quebec's main employers' group, the Conseil du Patronat du Québec, said it's reassuring that the government is budgeting more aid for this fall, as many businesses will likely need direct aid, beyond loans, to stay afloat.
She said operating costs have gone up due to COVID-19 prevention measures, and local businesses have to compete with international online shopping giants.
"Quebecers want to buy more local, but the price is an important issue," she said.
Opposition parties say that small businesses need more aid as soon as possible.
"The recession is very deep, is very strong and a large number of small businesses will not make it through the summer," said Quebec Liberal Party finance critic Carlos Leitão.
Leitão said Girard's forecast for 2021 is too optimistic.
Parti Québécois finance critic Martin Ouellet said he wants to know more about how the government will get back to balancing the budget without making cuts.
Québec Solidaire said with the virus still spreading in Quebec, it's too early to even be talking about balancing budgets.
"People are still dying.… We should focus on saving lives," said QS finance critic Vincent Marissal, who said he fears austerity cuts are coming after Girard said he would not hike taxes to cover the budget shortfall.
Quebec will balance the 2020-2021 budget, at least on paper, using an accounting mechanism known as the stabilization reserve.
Girard said the government will borrow the entire $14.9-billion value of the reserve to cover this year's historic deficit.
The reserve, created in 2009, will then be depleted until the government starts reporting surpluses.
Girard said he expects to run several deficits, but intends to balance the books in the next five years, in accordance with the Balanced Budget Act.
But if the public health situation does not improve, he acknowledged reaching his GDP targets would be "very difficult."
The government is continuing its payments to the Generations Fund, which services long-term debt. This year's deficit is estimated to put the province's debt at 50.4 per cent of Quebec's GDP in March 2021, but Girard said that should not affect the province's standing with credit-rating agencies.
The economic portrait also includes a notice to unions. The report says the government's capacity to maintain its current offer to public-sector workers — a five per cent raise over three years and lump sum payments of $1,000 and $600 by the end of fiscal 2021 — may not be on the table for long.
"The government's capacity to maintain this proposal could change rapidly," it says.
With files from Cathy Senay and Simon Nakonechny