Quebec: Fall 2024 Update - The Projected Deficit Is Not Worse for This Year, but…

The deficit for 2024–25 is maintained at $11.0B (1.8% of GDP). Revenues are expected to be $152.6B (4.9% growth), compared to estimated expenses of $160.6B (6.0% growth).

While revenues were revised upwards by the $1.6B bump in federal transfers, new spending initiatives and, to a lesser extent, higher borrowing costs, more than offset these gains. The Update includes new measures totalling $2.1B over five years, more than half of which is dedicated to public transit.

To make up for the shortfall, the government is counting on nearly $1B in savings from its review of fiscal expenses and is drawing $750M from its $1.5B contingency allowance for 2024–25. That said, the projected deficit is revised upward for 2025–26 (from $8.5B to $9.2B) and remains unchanged for the next two fiscal years.

Quebec’s real GDP growth for 2024 is revised up to 1.2% (from 0.6% in the March forecast). Growth of 1.5% is forecast for 2025. This outlook is not too far from ours and is supported by strong population growth and an improvement in household purchasing power in a context of sticky nominal wage growth and falling inflation.

The Update takes into account possible changes under the new U.S. administration, as 70% of Québec’s international exports are linked to the United States. Risks identified include potential changes to tariffs, changes in corporate and personal tax policies, and the CUSMA review scheduled for 2026.

Quebec’s funding program for 2024–25 is set at $32.5B, a reduction of $3.9B compared to the March 2024 budget. This reduction is attributable to the use of the 2023–24 pre-funded amounts and the reduction in net financial requirements.