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.
Document Highlights
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.
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