The next six months will be difficult, warns Girard

Francis Vachon Le Devoir The Minister of Finance, Eric Girard, presented on Tuesday an economic update including investments of 4.3 billion.

Despite six months which promise to be difficult for the Quebec economy, the Minister of Finance, Eric Girard, believes that the checks and tax cuts of the last two years will be sufficient to allow the population to get through this period.

Mr. Girard, who presented an economic update on Tuesday including investments of 4.3 billion, particularly for housing assistance, insisted on the financial room for maneuver already made available to the population.

“The situation is extremely difficult for Quebecers,” he declared during a press conference. The government's actions protect the purchasing power of Quebecers. »

The situation is extremely difficult for Quebecers. The government's actions protect the purchasing power of Quebecers.

— Eric Girard

For the first time in almost two years, Mr. Girard presented Tuesday at a budget meeting without offering a “check” against inflation, as was the case in March and November 2022, or a tax cut, as in last March’s budget.

The minister also recalled that taxpayers had not yet pocketed the entire tax reduction announced in March 2023 since withholding taxes were only modified last July. After having filed their income tax return for the current year, they will receive half of this reduction, which will be distributed to them by Revenu Québec in 2024.

“On the 2023 tax report, you will have the benefit of the tax cut for the first six months,” he said.

The minister also insisted on the indexation, higher than inflation, of tax measures, of 5.08%, from which individuals will benefit thanks to the automatic readjustment of deductions, credits, benefits and various aid.

“There is no need for checks at present,” he said, repeating what he had said last summer on two occasions.

In September , Prime Minister François Legault had for his part left the door ajar to the possibility of repeating the sending of checks if the need arises.

Last week, he attributed his government's decline in the polls to a bad mood among the electorate due to the difficult economic situation, an opinion Mr. Girard shares.

“Conditions are difficult for citizens, and in general, in the world, it makes governments unpopular,” he said Tuesday.

Conditions are difficult for citizens, and in general, in the world, it makes governments unpopular.

— Eric Girard

Six “very difficult” months

These prospects are not expected to improve in the coming months, according to the minister, who revised downwards his economic growth forecast for Quebec in 2024.

Economists at the Ministry of Finance now estimate that gross domestic product (GDP) will grow by 0.7% next year, not 1.4% as predicted in the budget tabled in March.

“The next six months will be very difficult,” said Mr. Girard.

The slowdown in the economy is being felt, even if the minister does not expect Quebec to be in recession. Economic growth is in a state of “stagnation”, around 0%, he estimates.

“We are in the heart of the slowdown,” Mr. Girard said.

< p>The financial framework presented on Tuesday has required certain readjustments since the last budget. The government has revised upwards the deficit for the 2022-2023 fiscal year, which ended last March. A sum of 1.1 billion was added to the shortfall of 5 billion that was anticipated. A reduction in personal tax revenue and federal transfers accounts for $805 million in this unforeseen event, which increases the debt/GDP ratio.

For the year 2023-2024, the government also had to draw on its provisions to cover another unforeseen event of 1.1 billion, caused by a drop in its tax revenues and an increase in its financing costs.

“We have an economic slowdown, a moderation. We are using this provision to deal with this slowdown,” explained the minister, who nevertheless maintains the return to a balanced budget planned for 2027-2028.

Still in terms of readjustments, the government increased its inflation forecasts for this year. They increased to 4.6% in the documents presented on Tuesday, compared to 3.5% in last March's budget. For next year, the Ministry of Finance currently forecasts an inflation rate of 2.7%, compared to 2.2% seven months ago.

Even though the minister admitted that “ normally, a budget leads to an increase in spending”, he seemed to close the door to an increase in the offer of 14.8% over five years made to public sector employees, who are currently negotiating the renewal of their collective agreements.< /p>

“Any additional spending is going to require borrowing,” he said.

Housing, climate and businesses

 

Of the investments of 4.3 billion announced Tuesday, the government plans to devote a good part, or 2.2 billion, to problems for which municipalities requested its financial intervention.

Over the next five years, therefore by 2027-2028, the Quebec government wants to spend 1.8 billion to build 8,000 social and affordable housing units and help lower-income households find housing. Of this number, 500 apartments will be intended for homeless people.

The government is tackling more broadly the problems of homelessness, which has increased by 44% in five years in Quebec, and assistance food, to which an additional 145 million will be allocated.

The budgets for emergency aid, support for culturally adapted services for Aboriginal people and reintegration will be increased by 124 million over the next five years.< /p>

While food banks are in greater demand than ever, Eric Girard's update provides for the injection of an additional $21 million starting this year.

To municipalities that are calling for more funding for adaptation to climate change, the government is offering an increase of 292 million over five years, a sum which must also be used to reduce the risks linked to forest fires.

After last summer's fires in northern Quebec, the update provides $404 million to support communities and the forestry sector.

The sums announced Tuesday by Mr. Girard include aid of $265 million offered by the Minister of Transport, Geneviève Guilbault, to cover the deficits of the public transport networks and an amount of 329 million intended for workforce training, particularly in the construction sector. Finally, a total of 995 million over five years will be used to stimulate private investment thanks to the improvement of a tax credit for businesses.