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The Quebec economy is bouncing back faster than was anticipated six months ago, raising the prospect of a smaller budget deficit even as the government faces new expenses to weather the pandemic, the province’s finance minister said.
“Things are looking better than we had forecasted in the budget,” which was based on economic growth of 4.2 per cent, Eric Girard said Tuesday at the online Bloomberg Canadian Fixed Income Conference. That forecast came in March.
Now, from consumption to residential investment, “all components are powering along,” and the private sector no longer needs most of the emergency programs set up during pandemic, he said.
Quebec’s economy stood out last quarter, growing at an annualized pace of 3.4 per cent even as the country as a whole contracted 1.1 per cent, held back by supply-chain disruptions. Canada’s second-most populous province has also managed to avoid another economic shutdown, which Girard attributes to “fairly high” vaccination rates and rules requiring proof of two jabs to enter restaurants, theaters and gyms.
About 83.8 per cent of eligible Quebeckers have been fully vaccinated, compared with 80.1 per cent nationally, according to data compiled by CTV News.
Yet Quebec hasn’t avoided a fourth wave of infections, which forced unplanned expenses upon the government. They included bonuses to recruit and retain nurses back full time into the public health-care system. That will eat into the additional tax revenue from faster growth.
Still, Girard suggested that the budget gap might be smaller in the current fiscal year than the $12.3 billion (US$9.7 billion) foreseen in March. Citing a recent British Columbia report that roughly halved its deficit prediction, he said he expects “all jurisdictions to do better than what was forecast.” Quebec will release its own update in coming weeks.
The provincial government hasn’t expressed outright alarm about a surge in residential real-estate prices, but it’s examining investment practices that may put pressure on the market, such as blind auctions, in order to protect buyers, Girard said.
“We’re looking at that carefully, but we need to be sure that what we will bring in replacement will be better than what we have now,” he said.
He recommended a similarly cautious approach by the federal government. Prime Minister Justin Trudeau, who was re-elected last week, campaigned on initiatives designed to make it easier for first-time buyers to enter the housing market, including a new loan program, tax credits and cheaper mortgage insurance.
“Demand is really strong, so any measure that would boost demand I think I would question and would want to analyze a lot before being implemented,” Girard said. “We need more supply, and we need to provide opportunities for builders to bring affordable housing to the market.”