Quebec: 2025 Fiscal Update Preview

Highlights

• The government is set to release its fall economic and financial update on November 25. Based on the available data, the projected $11.4B deficit (before deposits in the Generations Fund [GF]) for 2025–26 remains realistic, if not cautious. The public accounts released in September showed a smaller-than-expected deficit for 2024–25, revised down from $8.1B to $5.2B before contributions to the GF.
• The March budget’s economic forecasts proved to be sufficiently conservative: the second-quarter decline in GDP was not enough to significantly lower revenues. A stable labour market, rising wages and consumer spending that has remained resilient despite prevailing conditions are keeping own-source revenues on track.
• On the spending side, wage negotiations involving difficult concessions to various groups may increase upward pressure, but slowing population growth is expected to help contain spending.
• The financing program is ahead of schedule: The province has already secured 80% of the funding required for 2025–26, with approximately $6.1B left to be raised over the next five months. Given the persistently high risk of a global bond shock, this level of pre-financing is a prudent strategy. Government estimates indicate that a 1 percentage point increase in interest rates could increase annual debt servicing costs by $496M this year and $1.8B by year five.
• We expect the fall fiscal update to provide specifics on the shortfall projected for the 2028 to 2030 financial years. The provincial election, now just over 10 months away, will inevitably bring its share of promises involving revenue reductions and increased spending. We can only hope that fiscal discipline will prevail, notably through the identification of credible budgetary offsets to support these new commitments. The current fiscal framework offers limited room to accommodate uncosted promises.