A sharp decline in economic growth in Quebec won’t stop the provincial government from handing out billions to residents coping with high inflation.

The economy in Canada’s second-largest province will grow just 0.7 per cent next year, according to projections in Finance Minister Eric Girard’s economic and financial update on Thursday. That’s down from a forecast of 2 per cent in his March budget.

Girard confirmed the government plans to spend more than $13 billion (US$9.6 billion) over five years on a fiscal package it’s calling the “anti-inflation shield”. The biggest item is a $8.1 billion tax credit for seniors over 70 — the amount will rise from $411 to US$2,000.

“The economy is definitely slowing, there are risks,” Girard said at a news conference in Quebec City, citing the rapid rise in interest rates. “The cumulative effect of the Bank of Canada’s 400 basis points has not yet reached the economy.” 

Premier Francois Legault’s government has already announced other measures, including payments of as much as $600 to Quebec residents earning less than $100,000. The price tag is $3.5 billion.

Despite the new spending, Quebec’s deficit will improve for the fiscal year ending March 31, 2023, because inflation gave a boost to revenue, the government said. The new forecasts see a shortfall of $4.8 billion, compared with a $6.5 billion deficit in the original budget.  

“The government has chosen to give Quebecers back its additional revenue. This money is Quebecers’ money,” Girard said. He rejected the idea the fiscal package is inflationary, saying the measures will only increase consumer prices by 0.1 percentage points.

The minister’s fiscal update also included a recession scenario in which gross domestic product falls by 1 per cent next year. In that case, the budget deficit would jump by C$1.9 billion in the 2023-24 fiscal year, bringing the projected shortfall to $4.1 billion.