Quebec will present its budget on Tuesday and the province’s finance minister Eric Girard has signalled it will include financial supports to help businesses adapt to tariffs and the changing economic situation with the U.S.
But the new measures will increase costs at a time when Quebec is running a historically large deficit and struggling to rein in spending.
Last year, Quebec presented a budget with a projected deficit of $11 billion — its highest ever, Girard said at the time.
On Friday, Girard signalled that the projected deficit this year will be even larger because of economic headwinds caused by tariffs.
“There’s a lot of uncertainty. It has an impact on the economic situation,” he said. “It has an impact on the measures we have to take.”
But Girard said the province was still committed to “responsible management of public finances.”
There is as of yet no indication on exactly how large of a deficit Quebec will run in 2025-26, but Girard has indicated that the government supports to help businesses cope with tariff threats will have a cost and that will mean increases to public spending.
He said last week the government was planning to support businesses affected by tariffs and economic uncertainty in three phases.
“There are emergency measures … to support businesses,” he said. “There will be a period of transition because the economy will transform and there are important efforts at the level of innovation, investing to help companies to be able to face the new economic challenges.”
Much of the province’s deficit from 2024-25 — $3.2 billion — was structural. That means that the province had some expensive budget items that were considered temporary costs, but even in a perfectly healthy economy, the cost of running the government would still exceed tax revenue by $3.2 billion.
With that kind of spending, the government stands little chance of presenting a balanced budget in the next five years.
The Institut du Québec (IDQ), a non-profit economic research institute, said in a report earlier this month that Quebec will be unable to attain a balanced budget by 2029-30 — as prescribed by law — unless it seriously limits spending or increases taxes.
The IDQ said Quebec could reach a balanced budget sooner than projected by raising the provincial sales tax 0.5 per cent — or by drastically reducing spending.
The institute said that despite a slowdown in public spending, Quebec is still taking on too much debt and is in no place to balance its budget any time soon nor reduce debt-to-GDP ratio to 35.5 per cent — another legal requirement under the Balanced Budget Act.
Santé Quebec, the new Crown corporation in charge of the health-care system, has attempted to reduce spending throughout the network while reducing the impact on patients, but it has so far proven difficult.
Girard told reporters last week that he was not ruling out raising taxes — but he said the government would not increase the sales tax as the IDQ suggested. He declined to provide more details about what could be in the budget, beyond suggesting that Quebec was prepping for economic uncertainty caused by President Donald Trump’s tariff threats.
“You’ll see that the government has been thoughtful, has supported the economy in different phases,” Girard said.
Tariff turmoil could also throw the economy into a recession, Girard has warned. If that happens, it would constrain Quebec’s public spending even further because when the economy contracts, government revenues tend to dip and program costs for things like unemployment tend to rise.
