Quebec abandoned the goal of eliminating its deficit in the current fiscal year due to weaker-than-projected revenue growth and said it will need two more years to return to balance.
Canada’s second most populous province will post a deficit of C$2.5 billion ($2.4 billion) in the year that ends March 31, the Finance Department said today in a statement on its website. The shortfall will shrink to C$1.75 billion next year before disappearing in fiscal 2015-16, the government said.
Revenue will grow 2.6 percent in the current fiscal year, half of the 5.2 percent pace that the government targeted in its November 2012 budget, Finance Minister Nicolas Marceau said today in the provincial capital, Quebec City. Marceau, who had previously forecast a balanced budget for fiscal 2013-14, today pledged not to raise personal or corporate taxes as a result of the deficit.
“Spending is under control, but the revenue isn’t there,” Marceau said today at a televised press conference. “Given that the world economy is still fragile and uncertain, there was no question of reducing spending by C$2.5 billion to achieve fiscal balance. It would have been equally irresponsible to increase Quebecers’ tax burden.”
Weaker-than-expected inflation crimped the government’s revenue, said Marceau, who also blamed a decline in housing starts and a drop in mining royalties due to falling commodity prices. Economic growth in 2013 will be 0.9 percent in 2013, the government forecast today, down from an earlier forecast of 1.3 percent. Growth will probably rebound to 1.8 percent next year and in 2015, the government said.
Program spending this fiscal year will probably increase 2.5 percent to C$63.8 billion, unchanged from an earlier forecast, Finance Ministry documents show. Spending will then climb 2 percent annually through 2016-17, Marceau said.
Quebec now expects to borrow about C$15.5 billion in the year ending March 31, C$3.8 billion more than forecast eight months ago, Finance Ministry documents show. So far, the province has borrowed C$11.9 billion, with 12 percent of the amount raised on foreign markets, the documents show.
Borrowing will probably climb to C$19.6 billion next year before dropping to C$17.2 billion in fiscal 2015-16, the ministry also said.