MONTREAL (Reuters) – Quebec, the Canadian province hardest-hit by COVID-19, will post a record C$14.9 billion ($11 billion) deficit for the fiscal year ending in March, as it spent heavily to mitigate the impact of the pandemic, and expects a return to a normal level of economic activity in December 2021.
Quebec spent more than C$6.6 billion on financial support to mitigate the impact of the coronavirus and expects fiscal 2020-2021 revenue to decline by C$8.5 billion, a 9% drop in government’s own-source revenues, Finance Minister Eric Girard said on Friday.
The province has budgeted C$4 billion for mitigation of risks from a second wave of coronavirus outbreak in the fall, a number that has been included in the deficit forecast.
Quebec says it hopes to return to December 2019 production levels by the same month in 2021 and aims to return to fiscal balance within five years.
The province accounts for roughly a quarter of Canada’s population but has reported nearly 55% of the nation’s 100,200 coronavirus cases and almost two-thirds of its 8,300 deaths.
Quebec’s real GDP is projected to contract by 6.5% in calendar 2020, compared with the 2% growth expected in the March budget.
Shelter-in-place directives halted 40% of economic activity in the province for eight weeks, Girard said.
But some 230,000 jobs were gained since the reopening of economic sectors like construction and mining in May, bringing the unemployment rate to 13.7%.
“Conditions should improve by the end of the year, but not all the jobs will come back,” Girard told reporters in Quebec City.
Coronavirus has weighed on Canada’s second most populous province, which had been using budget surpluses driven by a strong economy to pay down debt.
Quebec is also forecasting gross-debt-to-GDP ratio at 50.4% in March 2021, compared with 43.4% in 2020.
(Reporting By Allison Lampert; Editing by Denny Thomas, Chizu Nomiyama and Steve Orlofsky)