Quebec: Mid-Year Fiscal Update 2023 - Targeted New Supports as Economic Backdrop Weakens

Quebec’s 2023 mid-year fiscal and economic update maintains plans to balance the books in fiscal year 2027–28 (FY2028) after deposits into the Generations Fund, and by FY2026 before those deposits. Its net debt-to-GDP ratio is set to decline from 38% in FY2024 to 36% in FY2028.

The province forecasts total borrowing requirements of $21.9B in FY2024, $29B in FY2025, and then total $75.9B from FY2026 to FY2028.

The largest single new policy measure was the indexation of the personal income tax system and social assistance benefits, which is not expected to hold back the planned return to balance. New spending was limited, and other measures concentrated on increasing the supply of new housing. These largely followed a series of recommendations published last month by Desjardins Economic Studies.

Amid heightened economic uncertainty, we like the province’s decision to limit new expenditures and build on success in reducing its debt load. The key risks to the plan going forward are weaker-than-expected expansion in line with our most recent projections and the possibility that population continues to outpace historical norms.