Photo: Jacques Nadeau Le Devoir
The prime ministers of canada, Justin Trudeau, and quebec, François Legault, when the conference of the leaders of the country to Montreal, in December 2018
An election campaign in Ottawa, and a first budget of the CAQ in Quebec city. Marked by slower economic growth, the year 2019 seems to not make any huge surprises so far at the chapter of public finances, even if the threat of a trade war involving the United States and China is never far away.
The last few months of 2018, marked by the arrival in power of 75 members of caquistes, put the table in the coming year. The CAQ was found at the controls of a budget surplus higher than expected, prompting The Globe and Mail to describe Eric Girard as the minister of Finance the most fortunate of Canada.
The new treasurer of the government Legault was there a challenge in particular for his first budget ? “In fact, I think it’s going well. In terms of economic and financial situation, the indicators are fairly green. The quebec economy is going well, it is slightly overheating, but not enough to get excited yet, ” said Pier-André Bouchard-St-Amant, a professor at the national School of public administration (ENAP).
“The liberals have done a relatively good job in the management of public finances, which means that the CAQ inherits still a good financial balance sheet. And they had a nice surprise of equalization, ” says Mr. Bouchard-St-Amant in referring to the fact that the amount of money that will Quebec, the federal government will increase substantially this year. The financial framework of the first year of the CAQ has nothing that appears ” outrageously bad estimate “, according to him.
The portrait of the surplus
When he presented his budget in march 2018, the liberal minister Carlos Leitão provided for a surplus of $ 850 million for 2018-2019. The liberals have lost their elections. Meanwhile, thanks to the economic growth fueling the tax revenue of the government, the projected surplus has jumped to 2.6 billion. The stabilization reserve, as a result of surpluses of the past, is expected to reach $ 8.8 billion by next march.
In respect of equalization payments, they will for the Quebec $ 12.8 billion in 2019-2020, which is 9 % higher than the current year. The transfers for health care will increase by 5 % to eur 6.7 billion.
The CAQ is committed to reducing the tax burden of $ 1.7 billion over five years during the economic update, December 3. The prime minister François Legault has said that “it is a beginning,” in the meantime “the real budget, the big budget” the end of the winter.
For the moment, the margins of manoeuvre are relatively healthy, ” said Pier-André Bouchard-St-Amant. “It is not in a universe tight. It is certain that, if the government takes decisions that decrease its revenues or increase its expenses, the portrait will change. It is that which is to follow in the very short term. “It will also monitor the federal election, due to a potential change.
“Since it is not in function for a few weeks, the government Legault has obviously decided to take his time before going forward with a new orientation of the fiscal framework of the province,” wrote the team of economists of the Desjardins group after the economic update. “This will be one to watch during the deposit of the next budget, in particular as regards the harmonization of the school taxes. “
First estimated at 700 million by the CAQ during the campaign, this adjustment of school taxes will cost instead of 900 million, according to calculations by the most refined of the ministry of Finance.
Added to this is a request of the cities that has made a lot of noise this year : they want that Quebec pays a point-of-sales tax (QST) in order to be less dependent on property tax. During the election campaign, all parties were in agreement.
The Ottawa side
On the federal side, where the Trudeau government does not really the end its deficits, the Finance minister, “we were a little bit announced its colors,” says Luc Vallée, chief strategist, Laurentian Bank securities (LBS).
In terms of the deficit, for example, ” its purpose seems to be to maintain the weight of the debt to GDP ratio “, or even its reduction. “There is a margin of manoeuvre, because the economy is growing, but not enough margin to produce a budget super electioneering,” said Mr. Valley. In any case, he believes, a big bang would have a limited impact. “The balance of Mr. Trudeau will speak for itself. “
The federal ministry of Finance has projected a deficit of $ 19.6 billion in 2019-2020, which will decrease to $ 11.4 billion in 2023-2024. The deficit would, therefore, 0.8% of GDP to 0.4 % over the period. By way of comparison, the u.s. deficit expected at around 1,000 billion us dollars this year would represent 5 % of the GDP of the United States. The countries of the european Union stood at 1 % in 2017.
Canadian economic growth should amount to 1.9% in 2019, and 1.8 % by 2020, according to laurentian bank securities. The Bank of Canada raised its key rate three times in 2018, more than what was provided some.
The main threat which threatens the canadian economy is that of a trade war involving China and the United States, think of Mr. Valley. “If there is a conflict prolonged, deep, if there is a rate of 25 %, it will hurt Canada. We could be headed for a growth that would be reduced by at least 1 %, even if this is not the scenario to which we subscribe. “