Quebec's finance minister Eric Girard recently shared the provincial government's fall 2024 fiscal update to Montreal's business community, outlining key economic measures and their impacts. The update, presented amid various economic challenges, highlights the government's intent to maintain control over its budget amid rising expenditures and revenue changes.
Firstly, Girard confirmed the Quebec government is standing firm on its projection of an $11 billion budget deficit for 2024-25. Although there was some positive news—a slight increase of the projected shortfall for 2025-26 from $8.5 billion to $9.2 billion—this did not shift the overall outlook significantly. The government's expectation of maintaining this large deficit reflects continued challenges, particularly with inflation affecting expenditures.
The fall update also indicated increased federal transfers which chiefly contributed to projected revenue boosts. These transfers saw upward adjustments, with the province receiving $1.6 billion this year largely attributable to special funding aimed at covering the costs of welcoming increased asylum seekers. The tweaks to the capital gains inclusion rate adopted federally will also facilitate higher revenue, adding approximately $972 million to the 2024-25 budget.
Despite the optimistic view on federal funding, the government did lower its growth projections for 2025, citing demographic concerns. The real and nominal gross domestic product growth is estimated at 1.5% and 3.6%, respectively, which may prove too optimistic, especially considering recent immigration cuts.
On the expenditure side, not much has changed compared to prior years, with the finance minister indicating fewer new spending measures were announced. The fresh spending totals only $2.1 billion spread over five years, significantly lower than last year's announcements which exceeded $13 billion. The new projects include investments around transit ($1.2 billion), natural disaster response ($433 million), and forestry support ($252 million). Colorado’s fall storm impacted several sectors, necessitating the disaster response funds.
Health and social service financing, which has been under considerable pressure due to public sector wage adjustments following the large-scale strikes at the end of 2023, is absorbing most of the increased expenditures—$898 million, to be precise. Additional allocations have also been made for infrastructure projects ($786 million) as well as rising costs of refundable tax credits ($201 million).
To manage the gap between revenue and expenditure amid the projected $11 billion deficit, the government has decided to halve its contingency reserve fund to $750 million. This step is seen as necessary to sustain budgetary flexibility and address pressing financial pressures.
While addressing the business leaders, Girard underscored the necessity of sustainable financial practices, stating there are still challenges to overcome. Quebec continues to be one of the most indebted provinces, which plays heavily on its fiscal flexibility. The government plans to lay out a comprehensive roadmap during the 2025 budget, aiming for balance by 2029-30.
Overall, Quebec's economic update does not present significant new initiatives but rather serves as a reflection of the province's current financial state—a blend of rising expenditures alongside promising federal support, yet with long-term goals for fiscal health still firm on the horizon.
This update operates as both reassurance and a call to attention: Despite the challenges, the intention remains to navigate forward and seek balance amid varying economic landscapes.
