Presenting a budget in the middle of a world crisis is not an easy thing to do. Which is why many voices in different jurisdictions are raising the possibility of delaying their budgets, in order to better evaluate the evolving economic situation and the COVID-19 outbreak.
The Quebec government of François Legault elected to stay on schedule. As planned, Finance Minister Eric Girard stood in the Salon Bleu National Assembly to deliver his budget speech. The potential pandemic was hovering in people’s mind. There were no handshakes after the Minister of Finance tabled his document and delivered his speech.
Premier Legault jokingly pretended that he could not even touch Eric Girard. Other fellow ministers have chosen to elbow bump, including Transport Minister François Bonnardel, and the Minister of the Economy, Pierre Fitzgibbon. There were smiles all around on the CAQ benches, but it the atmosphere created by the pandemic was still impossible to ignore.
Yet, in his speech, Girard barely mentioned the issue: “The spread of the coronavirus raises concerns around the world about its implications for health, but also about its possible effects on economic growth. We are ready to face it, thanks to the solidity of our public finances and the fundamentals of our economy. Quebec’s strong public finances and economic fundamentals will make it resilient to the economic uncertainties.”
That’s all there was to it.
No adjustments were made despite the events of the past few weeks. The growth projection remains at an optimistic 2 % for the next year.
Of course, Mr. Girard and his officials cannot plan for everything. The budget was cooked and baked before the coronavirus spread and before the markets reacted to the economic uncertainty.
Finance department forecasters were estimating that the Bank of Canada’s prime interest rate would remain unchanged in 2020. Too late, the Bank of Canada lowered it to 1 ¼ percent just last week.
“Oil prices should remain relatively stable”, they also project. Alas, oil prices collapsed last weekend, following the news of a no-deal conclusion at the OPEC+ meeting and Saudi Arabia’s announcement that it would open the market flood gates.
The turmoil in the markets are also too recent for the Quebec government to amend its budgetary documents.
For now, it is full steam ahead for the second budget of the CAQ: strong growth projections bringing in strong growth in spending, to the tune of 5.1%, almost double the projected growth of revenue.
What about the health crisis and the economic uncertainty?
The CAQ spin is that new money in the infrastructure plan will be enough to stimulate the economy and weather the storm: 130.5 billion dollars over the next ten years. Historic numbers, for sure, but most of that money had already been planned and announced. The real new money is an extra 1.5.billion a year, which was certainly planned before the coronavirus outbreak.
Still, if the government can get the money to flow, there will be significant projects in the education sector and in the health care system. Roads and public transit are also targeted.
Reading the fine print, one realizes though that there is not actually a lot of details about where the money is going to end up and that there are lots of vague words about opportunity studies and exploratory stages. And, of course, in many of these future projects, Quebec will want to get Federal money in order to proceed. A big question mark.
Also concerning is the fact that no amount is planned in the Health budget to specifically fight a potential COVID-19 epidemic in Quebec. The government points to the generic $200 million contingency fund as its fall back plan. Minister Girard had to recognize that any additional effort would put Quebec back in the red.
Granted, in Quebec right now, there are only seven confirmed cases, one probable case and 91 people under investigation. But numbers were low elsewhere too, at first. Quebec health workers have been instructed to avoid traveling to countries where they are at risk of contracting the virus.
The bottom line: the 2020 Quebec budget is already, on many levels, an obsolete document
Photo Credit: CBC News
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