Quebec’s Fiscal House Is in Order Ten Years After the Recession, but …: Analysis of Quebec’s Public Finances
Ten years after the 2008–09 recession, the Institut du Québec simulates the impact of a new recession on Quebec’s budget. The province’s fiscal situation is fragile because expenses are under pressure and demographic trends do not favour an increase in revenues.
- Under the Institut du Québec’s (IdQ) simulations, a typical recession could lead to an additional $2-billion deficit in year one that would grow to $3 billion five years later.
- Cuts in program expenditures and/or a stiff increase in taxes would be inevitable to balance the books.
- Carrying less debt would allow the government to maintain services during a recession and wait for an upturn before moving to balance the books.
To tackle a new recession, the Institut du Québec recommends:
- increasing the province’s borrowing capacity by reducing the debt ratio until 2035 and controlling expenses while maintaining predictable investments in health and education;
- putting surpluses to better use and capping the balance of the stabilization fund.