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Quebec Finance Minister Eric Girard pulls his mask as he walks in to present a financial update, June 19, 2020 at the legislature in Quebec City.Jacques Boissinot/The Canadian Press

Not long ago, Eric Girard was the most envied finance minister in Canada, with the economic wind at his back and Quebec’s once ballooning debt finally on a downward trajectory thanks to tough spending controls implemented by the previous Liberal government.

The coronavirus pandemic changed all that. Now, Mr. Girard, the former banker chosen as finance minister by Coalition Avenir Québec Premier François Legault barely 20 months ago, faces a record $15-billion deficit this year and a long, and likely winding, road back to balance.

Mr. Girard and his boss insist the CAQ government can eliminate the deficit within five years without raising taxes or cutting spending and that the province can simply “grow” its way back to a balanced budget. Anything is possible, of course. But Mr. Girard has yet to explain in detail how he expects to boost his province’s growth rate amid a looming demographic decline.

“We are doing everything thing we can to increase the potential economic growth [rate] of Quebec in the long term, from 1.3 per cent to 2 per cent, with productivity increases, investment in human capital, education and training,” Mr. Girard said last week after tabling a fiscal update that scrapped the assumptions on which his March 10 budget was based.

The update provided no projections beyond 2021, given the extraordinarily high degree of economic uncertainty facing policy makers. The $15-billion deficit projected for the current fiscal year amounts to an $18-billion swing from the $3-billion surplus Quebec posted in 2019-20. Combined with new borrowing to fund infrastructure projects, the deficit will lead to an 11.5-per-cent increase in the provincial gross debt this year to $222-billion.

The ratio of gross debt to gross domestic product is set to spike upwards to 50.4 per cent from 43.4 in 2019-20. And it is quite possible that, over the next few years, the rate will surpass the previous peak of 54.1 per cent, reached in 2014

Mr. Girard has suggested that provincial legislation adopted in 2006, which set a gross debt-to-GDP ceiling of 45 per cent by 2026, may need to be amended to extend the deadline for reaching that threshold. Prior to the pandemic, Quebec had been set to far exceed the targets for debt reduction set by former premier Jean Charest’s Liberal government.

Mr. Charest’s successor, Philippe Couillard, introduced spending caps in 2015 that, in combination with an economic boom and steady increases in federal transfer payments, put the province on the path toward a string of budget surpluses. Those previous surpluses will enable the CAQ government to stay onside with the province’s balanced-budget law, for now, despite this year’s gargantuan deficit. But expected shortfalls after 2021 will need to be offset with surpluses in subsequent years, unless the National Assembly amends the law.

The danger facing Mr. Girard is that the economic rebound he is predicting in 2021 fails to materialize. The province’s public finances risk falling back into a deficit trap as health-care costs continue to rise in the face of an aging population, while tax burdens that remain higher than elsewhere in Canada serve as a drag on business investment.

Quebec’s long-term care homes, which account for two-thirds of its more than 5,400 COVID-19 deaths, have suffered from years of underinvestment and overcrowding. Mr. Legault has promised to hire 10,000 more personal care workers, at nearly double prepandemic salaries, to work in the homes, known as Centres d’hébergement et des soins de longue durée (CHSLD). That is likely to lead to higher salaries throughout the health-care system, as nurses and doctors seek comparable increases in public-sector wage negotiations set to begin soon.

Mr. Girard did give himself some wiggle room for the current fiscal year by including $4-billion for contingencies in the deficit projection released last week. That sum could be used to provide additional support measures to businesses or individuals in the case of a second coronavirus wave or to offset lower-than-expected tax revenues if the recovery stalls.

Federal transfers are also set to surge by more than 18 per cent this year to nearly $30-billion, a sum that includes Quebec’s anticipated share of the $14-billion that Prime Minister Justin Trudeau’s government has promised to provide to the provinces to help deal with the pandemic. Federal transfers will account for 26 per cent of the Quebec government’s revenues this year as income from provincially-owned Hydro-Québec and Loto-Québec tanks.

Without a rebound in consumer confidence, business investment and employment in the second half of the year, the deficit could still climb higher before the fiscal year ends next March. Instead of cutting taxes in advance of the 2022 election, Mr. Girard may face pressure to raise them if this year’s “temporary” deficit becomes structural in nature.

None of this makes Mr. Girard Canada’s least-envied finance minister. Alberta and Saskatchewan face bigger economic hits from the pandemic. But Mr. Girard’s job just got a sure lot harder.

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