The economic downturn is slowly making itself felt in Quebec. This explains why Treasury Secretary Eric Girard just revised down his revenues for the current 2023-2024 fiscal year.
The Legault government’s financier has cut its revenue forecasts by around $1 billion. Two sources of income are particularly affected.
This includes a $650 million reduction in state-owned enterprise revenue. Instead of 6.8 billion, the minister expects 6.15 billion instead, which corresponds to a decrease of 6.7%. The majority of this decline in sales can be attributed to Hydro-Québec due to the decline in exports.
The other main source of revenue revised downwards is “corporate taxes,” which is expected to be reduced by $310 million. We are talking about a decline of almost 2.7%.
I think Secretary Eric Girard is showing optimism here compared to the first quarter results where the decline in corporate tax revenue was $524 million or 16.4% in just three months!
- Listen to the economy part with Michel Girard above QUB radio :
I don’t want to play the prophet of doom. But let’s agree that the net profits of companies are expected to fall significantly due to the sharp increase in borrowing costs and also the increase in wages. Falling profits mean falling taxes.
Despite its downward revision of a billion dollars in revenue, the CAQ government financier believes that it will manage to end the current financial year with the same deficit as expected, that is, 1.67 billion dollars before transferring the money to the Generations Fund. And that without even lowering spending forecasts.
By what miracle did he achieve this feat? It simply reduced its “emergency reserves” by $1 billion, which stood at $1.5 billion at the start of the year.
Including Generations Fund revenue payments, the budget deficit will reach $4 billion this year.
Photo Stevens LeBlanc
SLOW IT DOWN
Like the entire Canadian economy, Quebec’s economy has slowed since the beginning of 2023. After growing by 0.3% in the first quarter, real GDP contracted by 0.5% in the second quarter.
This slowdown coincides with a monetary tightening by the Bank of Canada aimed at containing the rise in inflation.
But Minister Girard remains optimistic. “The measures taken by the Bank of Canada so far are bearing fruit. Price growth is slowing. Despite this slowdown, rising wages and high price levels are supporting consumer spending by private households. »
However, Desjardins’ Economic Studies Department has serious concerns about the health of our economy.
“While the Canadian economy is just beginning to show signs of slowing, Quebec’s economy has been in a weak phase for several months. Our scenario assumes a contraction period in real GDP that is expected to last until early 2024.”
Oops, a little cold shower at the same time.
