The finance minister’s economic update portends a difficult period for public finances over the coming months and years.
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By halving projected real GDP growth in 2024 from 1.4% to 0.7%, combined with an increase in recurrent spending, particularly on the primary missions of the State, the Government’s room for maneuver is less, if not non-existent.
The government even had to dip into its reserves to finance the new measures announced yesterday, thus reducing the cushion that the finance minister jealously guards. And this is not a luxury: the needs in the fight against homelessness, housing and adaptation to climate change are glaring and urgent. The government could not afford to wait.
By some miracle, the minister persists and signs off on his will to maintain the horizon of a return to balance in 2027-2028. This is very commendable, but is it realistic? On the one hand, the financial cushion as explained above is thin, economic and geostrategic uncertainties could hide bad news (two wars simultaneously that could have an even greater impact on energy supply, elections in the United States, etc. ) and the billions in The reinvestments required by Hydro-Québec could unbalance this fragile house of cards.
In addition, it is curious to note that the government has not taken into account the financial impacts of Hydro-Québec’s new priorities in the calculation of the revenues of the state corporations. When integrating the financial impacts of Hydro-Québec’s new strategic plan, the annual dividend will undoubtedly be affected, thus generating a loss of revenue for the State. This is not expressed in the presented update.
Will Hydro-Québec force the government to review its horizon of returning to a balanced budget? One thing is certain, the government is walking a fine line and has almost no room for maneuver to deal with an uncertain financial and socio-political context. It could be forced to choose between its dam projects and an early return to budget balance. A difficult dilemma.