Credit rating agency Moody’s Investors Service has its doubts about the government of Quebec’s pledge to eliminate its deficit by 2015-2016.
Following the tabling of its new budget on June 4, Moody’s notes that the province’s fiscal health has weakened from earlier projections. It’s now forecasting a $2.35 billion deficit this year, up from the $1.75 billion forecast in November 2013. And, the estimated deficit for 2013-2014 has also been increased from its previous forecast. Yet, despite these deteriorations, the target for a return to balanced budgets remains unchanged, it notes.
The government aims to get there primarily by curbing spending, and by finding further savings in a review of program spending. The budget also proposes to launch a review of the province’s tax system, and Moody’s notes that it allocates results equal to $650 million from this review in the planned balanced budget.
“The goal of achieving a balanced budget for 2015-2016 rests on a substantial shift in spending patterns from recent years and revenue measures from a special review committee that has not yet been formed,” noted Michael Yake, assistant vice president and analyst at Moody’s. “Given the reliance on these factors, as well as the deterioration in fiscal balances for the recent past from previous targets, expectations of a balanced budget in 2015-2016 appear ambitious at this point.”
Moody’s also notes that the province announced that infrastructure spending will equal $90.3 billion over the next 10 years. “With higher deficits and significant infrastructure spending, Quebec’s debt burden is expected to increase over the next two years,” it says, adding that, nevertheless, the province remains committed to its plan for a gradual reduction of its debt burden, targeting gross debt to equal 45% of GDP by 2026.