Quebec budget deficit for 2024-25 didn't reach $11B, but new one will, finance minister warns
Quebec's finances are already firmly in the red. Tariffs could make that worse
It turns out that Quebec's deficit for this past fiscal year didn't reach the $11-billion mark that had initially been projected, but the one that will be presented on Tuesday most certainly will, and the threat of tariffs from U.S. President Donald Trump will likely be a big reason why.
The province's finance minister Eric Girard has signalled that Tuesday's budget will include financial supports to help businesses adapt to tariffs and the changing economic situation with the U.S.
The new measures will increase costs at a time when Quebec is struggling to rein in spending.
Last year, Quebec presented a budget with a projected deficit of $11 billion — its highest ever, Girard said at the time.
On Monday, however, Girard had a bit of good news, saying at a pre-budget press conference the deficit for this past fiscal year would in fact be a bit lower than expected.
"We finished 2024 in pretty good shape, the fiscal position is better, the growth was better than expected," he said, but added, "the deficit for 2025-2026 will be larger than the deficit for 2024-25."
Girard said the budget was complex and comes at a challenging time, making it difficult to pinpoint what the growth rate will be for 2025.
In light of those difficulties, Girard said the government had chosen to focus on the economy while protecting public services and will be presenting a plan to return to a balanced budget.
It's not exactly clear how large the deficiit will be for 2025-26, but Girard has indicated that the government supports to help businesses cope with tariff threats will have a cost and that will mean increases to public spending.
He said last week the government was planning to support businesses affected by tariffs and economic uncertainty in three phases.
"There are emergency measures … to support businesses," he said on Friday. "There will be a period of transition because the economy will transform and there are important efforts at the level of innovation, investing to help companies to be able to face the new economic challenges."
Much of the province's deficit from 2024-25 — $3.2 billion — was structural. That means that the province had some expensive budget items that were considered temporary costs, but even in a perfectly healthy economy, the cost of running the government would still exceed tax revenue by $3.2 billion.
With that kind of spending, the government stands little chance of presenting a balanced budget in the next five years.
The Institut du Québec (IDQ), a non-profit economic research institute, said in a report earlier this month that Quebec will be unable to attain a balanced budget by 2029-30 — as prescribed by law — unless it seriously limits spending or increases taxes.
The IDQ said Quebec could reach a balanced budget sooner than projected by raising the provincial sales tax 0.5 per cent — or by drastically reducing spending.
The institute said that despite a slowdown in public spending, Quebec is still taking on too much debt and is in no place to balance its budget any time soon nor reduce debt-to-GDP ratio to 35.5 per cent — another legal requirement under the Balanced Budget Act.
Santé Quebec, the new Crown corporation in charge of the health-care system, has attempted to reduce spending throughout the network while reducing the impact on patients, but it has so far proven difficult.
Girard told reporters last week that he was not ruling out raising taxes — but he said the government would not increase the sales tax as the IDQ suggested. He declined to provide more details about what could be in the budget, beyond suggesting that Quebec was prepping for economic uncertainty caused by President Donald Trump's tariff threats.
"You'll see that the government has been thoughtful, has supported the economy in different phases," Girard said.
Tariff turmoil could also throw the economy into a recession, Girard has warned. If that happens, it would constrain Quebec's public spending even further because when the economy contracts, government revenues tend to dip and program costs for things like unemployment tend to rise.
On Monday, however, Girard shared a more optimistic outlook regarding the threat of new tariffs being imposed next week.
He said that the U.S. is using the threat to exert pressure on Canada but that with the threat comes an opportunity for negotiation.
"It is our responsibility to convince the Americans that it is not in their interest to impose tariffs on Canada."
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With files from Annabelle Olivier