Economic update: Interest rate hikes are having an effect
Montreal, December 8, 2022 – The Montreal Economic Institute (MEI) reacted to the Quebec government’s economic update presented by Finance Minister Éric Girard earlier today.
“While the clouds hanging over Quebec’s budgetary situation seem to be dispersing, Minister Girard is right to remain prudent,” says Renaud Brossard, senior director of communications at the Montreal Economic Institute. “Everything indicates that the rapid increase in government revenues this year is an exceptional situation, whereas higher interest rates are an ongoing threat for a government as indebted as ours.”
Government revenues are $6.4 billion higher than they were projected to be in the March 2022 budget. This allows the government to reduce the deficit, bringing it down to $5.2 billion this year.
The increase in interest rates is being felt in the budget, raising interest payments on the debt by 37.1% compared to their pre-pandemic level. These will have cost Quebec taxpayers over $10.5 billion this year.
A recent MEI study showed that the budget of the provincial government alone represented 28% of Quebec’s GDP last year—an all-time high.
During Premier François Legault’s first mandate, the ratio of government spending to GDP grew by an average of 5.24% per year.
“While the Legault government’s first mandate was characterized by the pandemic, let’s hope that the theme of his second one will be getting the government’s fiscal house in order,” says Mr. Brossard. “With rising interest rates, it’s clear that Quebec can’t afford to continue spending and running up its debt the way it has.”
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The Montreal Economic Institute is an independent public policy think tank. Through its publications, media appearances, and advisory services to policy-makers, the MEI stimulates public policy debate and reforms based on sound economics and entrepreneurship.
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Senior Director, Communications
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