‘Miracle on Saint-Laurent Street’: Quebec economy sees country’s strongest post-pandemic rebound

Open this photo in gallery:

Quebec’s economy is poised to outperform every other Canadian jurisdiction this year in a remarkable rebound from the pandemic that has put the province on track to record its highest annual GDP growth on record.

The provincial government will spend some of its windfall on cost-of-living bonuses and training programs to help fight the labour shortage and inflation that plagues the province, Finance Minister Eric Girard said during a press conference announcing his fall fiscal update on Thursday.

But the surprisingly strong revenues will also allow Quebec to continue reducing its deficit and debt burden as it continues to close the persistent wealth gap with Ontario that Premier François Legault has made a fixation.

After economic activity declined by 5.5 per cent in 2020, it is expected to bounce back by 6.5 per cent this year, leaving the province richer than before the pandemic, according to government projections. That is much faster growth than the 4.2 per cent expected and slashes $5.4-billion from the projected provincial deficit.

“The economic performance of Quebec in 2021 was exceptional,” Mr. Girard said.

Analysts largely agree with the Finance Minister’s rosy assessment. In a recent research paper titled Miracle on Saint-Laurent Street, Bank of Nova Scotia economist Marc Desormeaux observed that growth of 6.5 per cent would be an “all-time record” for Quebec. It would also outpace Ontario and Canada as a whole, a rare distinction for a province that has traditionally lagged the rest of the country in GDP growth.

Quebec’s rocketing fortunes were fuelled in part by the timing of public-health measures, which the Legault government rapidly eased in the summer of 2020 after the pandemic’s first wave that led to a “staggering” 80-per-cent rise in household consumption in the third quarter of that year, Mr. Desormeaux said. Generous federal and provincial aid also injected life into the economy.

But Quebec’s boom times precede the recent recovery, the bank report points out, with large increases in full-time jobs and wages between 2017 and 2019, along with a household saving rate before the pandemic that was significantly higher than in the rest of Canada. Those strong fundamentals have helped the province emerge from the COVID-19 crisis in good shape, Mr. Desormeaux said.

“There’s a whole lot of momentum in Quebec’s economy.”

In his fall update, Mr. Girard acknowledged anxieties about the twin afflictions of inflation and labour shortages facing much of the Canadian economy. To help Quebeckers with a rising cost of living, he announced single lump-sum payments for low- and middle-income households, amounting to $400 for couples and $275 for people who live alone.

The province will also spend $2.9-billion over five years “to combat the labour shortage” by paying for the training, requalification and recruitment of as many as 170,000 workers, with a focus on the health, education, and engineering and IT sectors.

Despite new spending, strong economic growth allowed Quebec to revise its deficit and debt projections downward. This year’s budget deficit is now pegged at $6.8-billion, fully $5.4-billion less than expected. The province will also be able to reduce its gross debt level faster than anticipated, from 46.8 per cent of GDP in March of this year to an expected 44.3 per cent next March. The acceleration “can be explained by the strength of the economic recovery,” according to the economic and fiscal summary.

The raft of good news has allowed Quebec to play catch-up in its quest to close the wealth gap with Ontario, a goal the Legault government has repeatedly emphasized in its three years in power. Between 2017 and this year, the gap shrunk from 16.4 to 12.9 per cent. On Thursday, the government stated its ambition of eliminating Ontario’s wealth advantage altogether by 2036.

Asked whether that was an excessively long timeline, Mr. Girard pointed out how persistently Quebec has trailed its richer neighbour. “Fifteen years to close a wealth gap that’s been there for almost 100 years, I think that’s realistic,” he said.

Despite the province’s strong showing, some critics charge that it is misspending its unexpected revenue bump. The Conseil du patronat du Québec, a business group, said the work force measures don’t go far enough and that it was surprised by the lack of immediate help finding employees, calling this the “most serious labour shortage in [Quebec’s] recent history.”

While praising the government for continuing on its path to cutting the deficit, Maria Lily Shaw, an economist with the conservative Montreal Economic Institute, said she would have preferred the government to balance the budget sooner.

Our Morning Update and Evening Update newsletters are written by Globe editors, giving you a concise summary of the day’s most important headlines. Sign up today.