Quebec to hand out $500 payments to residents to counter inflation

QUEBEC CITY — Quebec on Tuesday announced payments of $500 each to residents to counter the rising cost of living ahead of a fall election and said it sees a $6.5-billion budget deficit for fiscal 2022/23.

The province is spending $3.2 billion on one time payments for 6.4 million Quebecers earning $100,000 or less in annual income, with inflation expected to surge this year in-part fuelled by Russian’s invasion of Ukraine.

“The inflation situation is exceptional,” Finance Minister Eric Girard told reporters in Quebec City. “So, the compensation is exceptional.”

Canada’s most populous provinces are eyeing smaller deficits as their economies recover from the pandemic.

Girard, whose Coalition Avenir Quebec government is facing an October election, denied the $136 billion budget is politically motivated.

“The need is now so we’re acting now,” said Girard, a former bank executive. “The election is in October.”

Quebec said it is partly banking on an acceleration in economic growth to narrow deficits through fiscal 2027/28 when it aims to reach a balanced budget. Yet the province’s own forecasts show GDP growth will decelerate in the coming years.

The fiscal year starts in April.

After surging 6.3 per cent in 2021 due to a strong recovery from COVID-19, Quebec expects real GDP to rise 2.7 per cent in calendar 2022, two per cent in 2023 and 1.5 per cent in 2024.

Carlos Leitao, finance critic for Quebec’s opposition Liberals and a former bank economist, said reaching a balanced budget would require tighter controls on spending “after the election,” since growth is expected to slow.

Quebec, Canada’s second-most populous province behind Ontario, would gradually reduce debt, Girard said.

The province sees a $7.4-billion deficit in 2021-22, compared with the $6.8 billion projected in November due to higher spending.

Quebec sees its net debt-to-GDP ratio declining from a better-than-expected 42.4 per cent in 2021-22 to 39.8 per cent in 2022-23.

(Reporting By Allison Lampert in Quebec City Editing by Chris Reese and Alistair Bell)