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Quebec’s economic recovery has opened room for the government to dole out cash to dull the bite of inflation, help train workers for sought-after jobs and shore up the province’s bottom line.
In a budget update released Thursday in Quebec City, the government said it expects a deficit of $6.8 billion (US$5.4 billion) in the current fiscal year, nearly half its March estimate. The improved fiscal outlook is mainly due to a surge in tax receipts, with the economy now seen expanding 6.5 per cent this year compared to the 4.2 per cent previously forecast.
“Quebec’s economy is currently experiencing an extraordinary recovery,” Finance Minister Eric Girard said in a statement. “The substantial improvement in public finances enables us to help Quebeckers cope with the cost of living and to act to accelerate economic growth by combating the labor shortage and stimulating business productivity.”
Despite the momentum, which also helped Quebec revise its deficit for last year down by half, the government left its target date for eliminating the deficit unchanged. Quebec’s books won’t be balanced until the end of the 2027-2028 fiscal year, the province said.
With the start of a COVID-19 inoculation campaign for children and vaccine boosters on the way, Premier Francois Legault is trying to shift some of his focus back to the economy, one year ahead of a provincial election. Measures announced Thursday address hot topics including inflation and labor shortages.
The government said it expects inflation to reach nearly 4 per cent in the fiscal year ending in March 2022. It announced a one-time payment of $275 for individual low-income earners, or $400 for couples, to help face the rising cost of living; increased aid to the elderly; and a bigger tax credit for childcare expenses.
It also promised to invest $2.9 billion over the next five years to help train or attract workers in industries with high job vacancy rates, including education, engineering, construction and information technology. That includes incentive scholarships worth as much as $20,000 over four years.
The government plans to use its stabilization reserve, a pool into which surpluses are automatically allocated, to bring its headline deficit this year down to $5.6 billion.
The reserve isn’t readily available cash but an accounting tool the government can use without endangering its budgetary balance. Under Quebec’s rules, the shortfall also comes after a payment to a debt-reduction pool known as the Generations Fund.
Quebec’s plan also revises down its debt financing needs. The government plans to borrow $24.5 billion in 2021-22, $3.9 billion less than previously forecast.