Inflation: Quebec's deficit almost wiped out, according to the Auditor General

Inflation: Quebecébec’s deficit almost wiped out, according to the Auditor General

Auditor-General Guylaine Leclerc

If inflation suffocates citizens, it benefits the provincial government according to the pre-election report of the auditor general (AG), Guylaine Leclerc, which points out that the projected deficit of Quebec for 2022-2023 would amount to $ 700 million. This is well below the $6.45 billion hole initially forecast by the Legault government.

The Auditor General (AG) tabled a report on the province’s financial state on Monday morning. According to his analysis, the increase in the Quebec government’s own-source revenue, mainly due to inflation, will virtually wipe out its entire deficit, and surpluses are even expected for the years to come.

In terms of state revenues, all the predictions submitted by the Ministry of Finance have been revised upwards. Québec's own-source revenue will be $4.7 billion higher, while state corporations will earn $579 million more.

Citizens will pay $2.3B more in taxes than the minister predicted. Businesses will pay $1 billion more. This is explained in particular because of the “strong increase in wages”. It should be remembered that the citizens' tax constitutes 38% of all the provincial government’s own-source revenue.

As for taxes, Quebec will pocket $639 million more than expected. “The inflationary shock has a lot to do with it,” explained Ms. Leclerc at a press conference. The performance of businesses and government corporations therefore does not justify the planned increases.

Alternative pessimist

The predictions are positive, but the economic context still presents a “very high level of uncertainty”, recalls the VG. In the current context, the AG proposes to the government to include provisions for risks in these exercises for the next few years. These sums could amount to $2 billion for 2023-2024, and $1.85 billion for 2024-2025.

On a global scale, inflation creates a tightening of monetary policies, recalls the Auditor General. This could affect Quebec, as well as the war in Ukraine. Also, the government could find it difficult to spend in certain sectors due to the shortage of labour, she predicts.

All in all, Minister Girard's forecasts are “plausible,” concludes Ms. Leclerc. But because of the risk of recession, various alternatives should have been presented by Quebec. She would have liked to see an optimistic scenario, a realist and a pessimist.

This would have made it possible to “estimate the potential impact of the materialization of the main current risks on the economic outlook and on the financial framework,” she writes.

It is the mandate of the department to present a report on the state of Quebec's finances before the elections are held since 2015. This report must then receive the seal of approval of the AG.

These data then help parties establish their electoral platforms. It will be their responsibility to reduce the services, or to increase the debt, for example, according to their perception.

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