# EDGAR Filing Document

**Accession Number:** 0000722803
**File Stem:** 0001176256-23-000057
**Filing Date:** 2023-3
**Character Count:** 364472
**Document Hash:** d81987525d8c33c0b1d0f53343b0a25b
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001176256-23-000057.hdr.sgml**: 20230324

**ACCESSION NUMBER**: 0001176256-23-000057

**CONFORMED SUBMISSION TYPE**: 18-K/A

**PUBLIC DOCUMENT COUNT**: 102

**CONFORMED PERIOD OF REPORT**: 20220331

**FILED AS OF DATE**: 20230324

**DATE AS OF CHANGE**: 20230324

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** QUEBEC
- **CENTRAL INDEX KEY:** 0000722803
- **STANDARD INDUSTRIAL CLASSIFICATION:** FOREIGN GOVERNMENTS [8888]
- **IRS NUMBER:** 000000000
- **FISCAL YEAR END:** 0331

**FILING VALUES:**
- **FORM TYPE:** 18-K/A
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 002-86339
- **FILM NUMBER:** 23759292

**BUSINESS ADDRESS:**
- **STREET 1:** 12 ST-LOUIS ST
- **STREET 2:** MINISTERE DES FINANCES
- **CITY:** QUEBEC QC CANADA GIR 5L3
- **STATE:** A8
- **ZIP:** 00000

**MAIL ADDRESS:**
- **STREET 1:** 12 ST-LOUIS ST
- **STREET 2:** MINISTERE DES FINANCES
- **CITY:** QUEBEC QC CANADA GIR 5L3
- **STATE:** A8
- **ZIP:** 00000

------

**FORM 18-K/A**<br>**For Foreign Governments and Political Subdivisions Thereof**

**SECURITIES AND EXCHANGE COMMISSION**<br>Washington, D.C. 20549

**AMENDMENT NO. 14**

**to**

**ANNUAL REPORT**

of

**QUÉBEC**<br>(Name of Registrant)

**Date of end of last fiscal year: March 31, 2022**

**SECURITIES REGISTERED\***<br>**(As of close of fiscal year)**

---

| | | |
|:---|:---|:---|
|  | Amounts as to | Names of |
| Title of issue | which registration | exchanges on |
| | is effective | which registered |
| N/A | N/A | N/A |

---

Name and address of person authorized to receive notices and communications from the Securities and Exchange Commission:

Martine Hébert<br>*Délégation générale du Québec*<br>One Rockefeller Plaza <br>26<sup>th</sup> Floor <br>New York, N.Y. 10020-2102

Copies to:

---

| | |
|:---|:---|
| Catherine M. Clarkin | Alain Bélanger |
| *Sullivan & Cromwell LLP* | *Ministère des Finances du Québec* |
| 125 Broad Street | 390, boulevard Charest Est |
| New York, N.Y. 10004-2498 | Québec, Québec, G1K 3H4, Canada |

---

\* The Registrant is filing this Annual Report on a voluntary basis.<br>

------

The undersigned registrant hereby amends its Annual Report on Form 18-K for the fiscal year ended March 31, 2022 (the "Annual Report") as follows:

The following additional exhibit is hereby added to the Annual Report:

<u>Exhibits:</u>

---

| | |
|:---|:---|
| [(99.16)](exhibit99-16.htm) | [Section A - "Overview" from "Budget 2023-2024 - A committed Québec - March 2023", March 21, 2023.](exhibit99-16.htm) |
| [(99.17)](exhibit99-17.htm) | [Section G - "The Québec economy: Recent developments and outlook for 2023 and 2024" from "Budget 2023-2024 - A committed Québec - March 2023", March 21, 2023.](exhibit99-17.htm) |
| [(99.18)](exhibit99-18.htm) | [Section H - "Québec's Financial Situation" from "Budget 2023-2024 - A committed Québec - March 2023", March 21, 2023.](exhibit99-18.htm) |
| [(99.19)](exhibit99-19.htm) | [Section I - "The Québec Government's Debt" from "Budget 2023-2024 - A committed Québec - March 2023", March 21, 2023.](exhibit99-19.htm) |
| [(99.20)](exhibit99-20.htm) | [Excerpts from "Budget Speech 2023-2024", March 21, 2023:](exhibit99-20.htm) |
|  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;-Québec government - Summary of budgetary transactions - Preliminary results for 2022-2023 (table 1);<br> - Québec government - Summary of budgetary transactions - Forecasts for 2023-2024 (table 2);<br> - Québec government - Revenue - Forecasts for 2023-2024 (table 3);<br> - Québec government - Expenditure - Forecasts for 2023-2024 (table 4);<br> - Québec government - Portfolio Expenditures Forecasts for 2023-2024 (table 5). |
| [(99.21)](exhibit99-21.htm) | [Section C - "Report on the application of the legislation respecting a balanced budget and the Generations Fund" of "Additional Information" from "Budget 2023-2024 - A committed Québec - March 2023", March 21, 2023.](exhibit99-21.htm) |

---

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Amendment no. 14 to be signed on its behalf by its authorized agent.

QUÉBEC

---

| | |
|:---|:---|
| By: | <u>/s/ Alain Bélanger</u> |
| Name: | Alain Bélanger |
| Title: | Assistant Deputy Minister |

---

Date: March 24, 2023

2<br>

------

## Exhibit 99.16

------

**Exhibit 99.16**

**Section A**

 **OVERVIEW**

---

| | | | |
|:---|:---|:---|:---|
| **Summary** | **Summary** | **Summary** | **A.3** |
| **1.** | **A committed Québec** | **A committed Québec** | **A.7** |
|  | 1.1 | Growing Québec's wealth | A.7 |
|  | 1.2 | Developing the potential of youth | A.9 |
|  | 1.3 | Making the health care system more effective and more humane | A.10 |
|  | 1.4 | Supporting Quebecers | A.11 |
|  | 1.5 | Diversifying and consolidating environmental measures | A.13 |
| **2.** | **Québec's economic situation** | **Québec's economic situation** | **A.15** |
|  | 2.1 | The year 2023, a period of transition before the return to sustainable growth | A.15 |
| **3.** | **Québec's financial situation** | **Québec's financial situation** | **A.17** |
|  | 3.1 | A smaller budgetary deficit in 2022-2023 | A.17 |
|  | 3.2 | Financial framework | A.19 |
|  | 3.3 | Returning to a balanced budget | A.21 |
|  | 3.4 | Increased investment in public infrastructure | A.23 |
| **4.** | **Gradually reducing the debt burden** | **Gradually reducing the debt burden** | **A.25** |
| **5.** | **Alternative forecast scenarios** | **Alternative forecast scenarios** | **A.27** |

---

---

| | | |
|:---|:---|:---|
| **Appendix:** | **Québec's economic outlook – 2021 to 2027** | **A.31** |

---

A.1

![](ex99-16_008.jpg)

**Summary**

The government is continuing the efforts of the past four years. Budget 2023-2024 prioritizes the economy, education, health and the environment, while maintaining a prudent and responsible financial framework.

The year 2023 will be a period of transition for the global economy, marking a move to a more stable economic environment.

— In early 2020, the COVID-19 pandemic caused a shock of unprecedented magnitude, sending the economy into a short but deep recession.

The subsequent economic recovery in 2021 and 2022, monetary and fiscal stimulus, supply-demand imbalances and Russia's invasion of Ukraine created an environment conducive to upward inflationary pressures. Most central banks have raised their policy rates during the past year in order to curb demand and control prices.

— The rising cost of living and deteriorating credit conditions will weigh on global economic expansion in the coming quarters. Most regions will experience a significant slowdown in economic activity in 2023.

However, the expected global slowdown could be short-lived. Controlling inflation should help restore an environment conducive to sustainable growth as of 2024.

**☐** Québec's economic situation

Economic activity in Québec, like that in the global economy, should moderate in 2023.

Inflation and high interest rates will curb economic activity. Real GDP growth is expected to slow from 2.8% in 2022 to 0.6% in 2023.

Controlled inflation and more advantageous credit conditions will foster economic recovery. The expansion of economic activity should accelerate, reaching 1.4% in 2024.

The Québec government has set ambitious objectives for creating wealth and increasing Québec's economic potential. Major steps have been taken to boost business productivity and promote the integration and retention of workers in the labour market. This has helped improve the standard of living for Quebecers and thus reduce the wealth gap with Ontario.

Since 2019, Québec has made substantial gains in relation to living standards. This improvement has allowed it to narrow the gap with Ontario from 16.4% in 2018 to 13.7% in 2022.

Living standards will continue to catch up despite the slowdown in economic activity. The standard of living gap with Ontario should fall to 12.8% in 2023.

<br> Overview A.3

The government is maintaining its objective of catching up with Ontario's real GDP per capita and aims to bring the gap down to below 10% by the end of 2026. This collective prosperity will benefit all Quebecers and will ensure long-term funding of public services.

☐ A committed Québec

The *Québec Budget Plan – March 2023* reflects the government's determination to fulfill its main commitments:

— increasing Québec's economic potential;

— developing the potential of youth to ensure the future of Québec society;

— deploying the plan to reform health care;

— maintaining sound public finances over time.

&nbsp;&nbsp;&nbsp;&nbsp;■ Initiatives exceeding $24 billion

In the *Québec Budget Plan ‒ March 2023*, the government is providing investments of $24.5 billion by 2027-2028.

The first lever on which the government is acting is increasing Québec's economic potential. Achieving this objective calls for improving Quebecers' disposable income, for continuing public investments, for investments to enable businesses to increase their productivity, and for increasing the labour pool.

Investments of nearly $12.1 billion are provided by 2027-2028 for growing Québec's wealth, particularly through a $9.2-billion income tax cut that will benefit 4.6 million Quebecers.

The government is continuing to invest in education and higher education. It is fostering access, retention and graduation rates, at all educational levels, by making sure that the education and higher education system meets the needs of pupils, students and staff.

Investments of more than $2.3 billion by 2027-2028 are provided to develop the potential of youth.

In the wake of initiatives introduced under the plan to reform health care tabled in March 2022, the government is continuing its transformation of the health care system in order to improve care and services to the public. The system will become more efficient and more flexible. The challenge is important, but crucial for Québec society.

Investments of nearly $5.6 billion by 2027-2028 are provided to make the health care system more effective and more humane.

Budget 2023-2024 <br> A.4 Budget Plan

![](ex99-16_008.jpg)

In addition, the government is planning investments of nearly $3.6 billion to support Quebecers.

In recent years, several measures have been taken to curb the decline of the French language in Québec, including the enactment in June 2022 of Bill 96, *An Act respecting French, the official and common language of Québec*. The government will continue to take action in this matter by accelerating the implementation of the Act and adopting the tools necessary to monitor the language situation in Québec.

Investments of $649 million by 2027-2028 are provided to promote culture and the French language.

The Québec government recognizes how important it is for households to live in quality housing that suits their financial capacity. However, recent years have seen a sharp rise in rental costs, making it hard for certain households to meet this need. Lower-income households are particularly impacted by this situation.

Investments of $1.0 billion over six years are provided to improve housing affordability.

Lastly, ensuring that the public and future generations have a healthy environment is a priority for the government. It is committed to diversifying and consolidating actions for the environment by supporting measures for climate transition, water management and biodiversity.

The 2030 Plan for a Green Economy will receive an additional $1.4 billion in investment, reaching $9.0 billion over five years. This is an 18% increase compared with the current plan.

In addition, $1.0 billion will be invested over five years to diversify and consolidate environmental measures, in particular the creation of the Fonds bleu and the implementation of the Plan nature 2030.

TABLE A.1

**Financial impact of the measures of Budget 2023-2024**

**(millions of dollars)** 

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **2022- <br>2023** | **2023- <br>2024** | **2024- <br>2025** | **2025- <br>2026** | **2026- <br>2027** | **2027- <br>2028** | **Total** | **Ref. section** |
| Growing Québec's wealth | –502 | -2 081 | -2 311 | -2 438 | -2 364 | -2 403 | -12 099 | B |
| Developing the potential of youth | –34 | –345 | –499 | –496 | –470 | –467 | -2 311 | C |
| Making the health care system more effective and more humane |  | -1 034 | -1 135 | -1 135 | -1 135 | -1 135 | -5 574 | D |
| Supporting Quebecers | –514 | –740 | –773 | –592 | –515 | –419 | -3 554 | E |
| Diversifying and consolidating environmental measures | –15 | –122 | –166 | –188 | –217 | –245 | –953 | F |
| **TOTAL** | **-1 064** | **-4 323** | **-4 885** | **-4 849** | **-4 700** | **-4 670** | **-24 490** |  |

---

Note: Totals may not add due to rounding.

<br> Overview A.5

■ Responsible management of public finances

In fulfilling these commitments, sound management of public finance will be kept to the forefront.<sup>1</sup> The return to a balanced budget, after deposits in the Generations Fund, is planned for 2027-2028. It will be achieved while maintaining significant investments in the government's main missions.

The financial framework of Budget 2023-2024 is prudent and provides for shrinking deficits, while including a contingency reserve of $6.5 billion. Amendments to the *Balanced Budget Act* will be proposed to improve its applicability in unfavourable economic contexts.

Reducing the debt burden also remains a priority for the government. In addition to promoting greater intergenerational fairness, it contributes positively to economic growth by creating a climate of confidence conducive to private investment and higher productivity.

This is why the government is setting a new debt reduction objective. Net debt, which will stand at 37.4% of GDP as at March 31, 2023, will progressively be reduced to within a range of 27.5% of GDP to 32.5% of GDP within the next 15 years, that is, by fiscal year 2037-2038.<sup>2</sup>

The median net debt reduction target will therefore stand at 30% of GDP.

<sup>1</sup> Unless otherwise indicated, this document is based on budgetary and economic data available as at March 8, 2023. The budgetary data presented for 2022-2023 are preliminary results. Data for 2023-2024 to 2027-2028 are forecasts and those for subsequent years are projections.

<sup>2</sup> Amendments to the *Act to reduce the debt and establish the Generations Fund* will be proposed for this purpose.

Budget 2023-2024 <br> A.6 Budget Plan

![](ex99-16_008.jpg)

**1.** **A committed QuĖbec** 

1.1 Growing Québec's wealth

The government is pursuing ambitious goals to create wealth and increase Québec's economic potential.

— Major steps have been taken since fall 2018 to increase business productivity, support innovation and promote worker integration and retention in the labour market, which has helped improve the standard of living of Quebecers and reduce the wealth gap with Ontario.

The government has committed to cut personal income tax, which will improve Quebecers' disposable income and help increase Québec's prosperity by stimulating both economic growth and the labour supply.

To achieve this, the government is announcing an immediate income tax cut totalling $9.2 billion over six years, or $1.7 billion per year. It could reach $814 per person as of 2023 and will benefit 4.6 million Quebecers.

It will also continue to act on the main determinants of economic growth, that is, productivity gains, innovation, leveraging the regions and increasing the pool of qualified workers.

In Budget 2023-2024, initiatives totalling nearly $12.1 billion by 2027-2028 are planned to grow Québec's wealth:

$9.2 billion for increasing Quebecers' disposable income, with a 1-percentage-point reduction in the two bottom tax rates starting this year;

$888 million for increasing the productivity of Québec's economy;

$1.4 billion for contributing to the prosperity of the regions;

$615 million for addressing the labour shortage.

Measures will also be taken to adapt the Québec Pension Plan to the new realities of Quebecers.

<br> Overview A.7

TABLE A.2

**Financial impact of the measures to grow Québec's wealth**

(millions of dollars)

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | **2022-**<br> **2023**  | **2023-**<br> **2024**  | **2024-**<br> **2025**  | **2025-**<br> **2026**  | **2026-**<br> **2027**  | **2027-**<br> **2028**  | **Total** |
| Increasing Quebecers' disposable income | –402 | -1 657 | -1 698 | -1 750 | -1 802 | -1 857 | -9 166 |
| Increasing the productivity of Québec's economy |  | –109 | –222 | –199 | –173 | –184 | –888 |
| Contributing to the prosperity of the regions |  | –220 | –271 | –375 | –290 | –275 | -1 430 |
| Addressing the labour shortage | –100 | –95 | –120 | –114 | –98 | –87 | –615 |
| Adapting the Québec Pension Plan to the new realities of Quebecers |  |  |  |  |  |  |  |
| **TOTAL** | **-502** | **-2 081** | **-2 311** | **-2 438** | **-2 364** | **-2 403** | **-12 099** |

---

Note: Totals may not add due to rounding.

Budget 2023-2024 <br> A.8 Budget Plan

![](ex99-16_008.jpg)

1.2 Developing the potential of youth

In Québec, education has been, and continues to be, the cornerstone of our society's development. The government is making education its top priority. High-quality education services ensure collective prosperity.

In recent years, major efforts have been made to increase student success and retention, promote participation in recreation and sports, and foster access and graduation rates in higher education.

The government's action is centred on key policy directions to increase educational success, including:

— enhancing the teaching of French, reading and mathematics;

— offering more special projects and making them more accessible;

— investing in vocational training;

— supporting teachers;

— fostering higher education graduation rates.

Budget 2023-2024 is providing an investment of $2.3 billion over six years to develop the potential of youth:

$1.5 billion for helping youth succeed;

$88 million for getting Quebecers moving;

$717 million for fostering student access, retention and graduation rates in higher education.

TABLE A.3

**Financial impact of the measures to develop the potential of youth**

(millions of dollars)

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | **2022-<br> 2023**  | **2023-<br> 2024**  | **2024-<br> 2025**  | **2025-<br> 2026**  | **2026-<br> 2027** | **2027-<br> 2028**  | **Total** |
| Helping youth succeed |  | –231 | –334 | –330 | –305 | –305 | -1 505 |
| Getting Quebecers moving |  | –13 | –20 | –21 | –19 | –17 | –88 |
| Fostering student access, retention and graduation rates in higher education | –34 | –101 | –146 | –146 | –146 | –146 | –717 |
| **TOTAL** | **–34** | **–345** | **–499** | **–496** | **–470** | **–467** | **–**2 311** |

---

Note: Totals may not add due to rounding.

<br> Overview A.9

1.3 Making the health care system more effective and more humane

The health and social services system has been under great strain in recent years during the pandemic. In March 2022, building on the lessons learned, the government launched its plan to reform health care and initiated a major shift to address the numerous challenges that continue to exist in the health and social services sector.

As a result, initiatives in health and social services of nearly $5.6 billion over the next five years are planned in Budget 2023-2024:

$3.0 billion for making the health care system more efficient and more flexible for the public;

$2.0 billion for caring for seniors and informal or family caregivers;

$565 million for supporting the most vulnerable.

TABLE A.4 <br>**Financial impact of the measures to make the health care system more effective and more humane**

(millions of dollars)

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | **2022-<br> 2023**  | **2023-<br> 2024**  | **2024-<br> 2025**  | **2025-<br> 2026**  | **2026-<br> 2027**  | **2027-<br> 2028**  | **Total** |
| Making the health care system more efficient and more flexible for the public |  | –613 | –623 | –623 | –590 | –564 | -3 013 |
| Caring for seniors and informal or family caregivers |  | –316 | –401 | –401 | –434 | –443 | -1 996 |
| Supporting the most vulnerable |  | –105 | –111 | –111 | –111 | –128 | –565 |
| **TOTAL** |  | **-1 034** | **-1 135** | **-1 135** | **-1 135** | **-1 135** | **-5 574** |

---

Note: Totals may not add due to rounding.

Budget 2023-2024 <br> A.10 Budget Plan

![](ex99-16_008.jpg)

1.4 Supporting Quebecers

Over the past few years, the government has pursued its commitment to support families, people in need of housing, community organizations and vulnerable people.

In this budget, it is consolidating its actions and strengthening its support for communities. Accordingly, $3.6 billion is provided over six years to support Quebecers:

$649 million for promoting and advancing Québec culture, and continuing<br> to uphold, promote and advance the French language;

$1.0 billion for fostering the affordability of housing by, in particular, increasing the supply of social and affordable housing and by providing additional support to Quebecers who need to find housing;

Of this amount, $650 million will support the completion of over 5 250 social and affordable housing units throughout Québec, as well as ensure the preservation of aging housing units.

$440 million for supporting families by providing educational childcare services adapted to their needs and by supporting vulnerable children;

In this respect, an investment of $331 million will enable 5 000 non-subsidized childcare spaces to be converted into subsidized spaces.

$722 million for strengthening the accessibility and efficiency of transportation networks, particularly by supporting public transit;

$533 million for improving inclusion and equality, increasing support for various communities by boosting support for community organizations, among other things, protecting the safety of the public and facilitating access to justice;

$121 million for continuing to support First Nations and Inuit people, thereby strengthening and facilitating access to services provided;

$88 million for modernizing architectural and land-use practices.

<br> Overview A.11

TABLE A.5 <br>**Financial impact of the measures to support Quebecers**

(millions of dollars)

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | **2022-<br> 2023**  | **2023-<br> 2024**  | **2024-<br> 2025**  | **2025-<br> 2026**  | **2026-<br> 2027**  | **2027-<br> 2028**  | **Total** |
| Promoting culture and the French language |  | –140 | –146 | –126 | –118 | –119 | –649 |
| Improving housing affordability | –237 | –173 | –127 | –189 | –168 | –106 | -1 001 |
| Supporting families |  | –36 | –101 | –107 | –108 | –88 | –440 |
| Strengthening the accessibility and efficiency of transportation networks | –200 | –244 | –236 | –33 | –8 | –2 | –722 |
| Supporting Quebecers' quality of life | –46 | –109 | –114 | –104 | –83 | –77 | –533 |
| Continuing to support First Nations and Inuit people | –16 | –33 | –34 | –16 | –12 | –12 | –121 |
| Modernizing architectural and land-use practices | –16 | –5 | –16 | –17 | –19 | –15 | –88 |
| **TOTAL** | **–514** | **–740** | **–773** | **–592** | **–515** | **–419** | **-3 554** |

---

Budget 2023-2024 <br> A.12 Budget Plan

![](ex99-16_008.jpg)

1.5 Diversifying and consolidating environmental measures

To fight climate change, the government is setting aside an additional $1.4 billion as part of its yearly update of the 2030 Plan for a Green Economy. The new implementation plan, to be unveiled soon, will therefore benefit from $9 billion in funding over five years.

In addition, at the United Nations Conference on Biodiversity (COP15), the government announced the implementation of the Plan nature 2030 and committed to protect Québec's water reserves.

To achieve this, the government is investing $500 million over five years to support the creation of the Fonds bleu, a portion of which will be funded from the duty payable for water use, and is confirming the investments in Plan nature 2030.

In Budget 2023-2024, the government is providing $1 billion:

$520 million for protecting water resources and ensuring the safety of dams;

$475 million for protecting biodiversity and promoting access to nature;

$23 million for promoting agri-environmental practices.

Lastly, additional revenue of $65 million over five years resulting from an increase in the environmental duty on new tires will allow the Québec Integrated Used Tire Management Program to continue. This environmental duty has not been increased since its introduction in 1999.

TABLE A.6 <br>**Financial impact of the measures to diversify and consolidate environmental measures**

(millions of dollars)

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | **2022-<br> 2023**  | **2023-<br> 2024**  | **2024-<br> 2025**  | **2025-<br> 2026**  | **2026-<br> 2027**  | **2027-<br> 2028**  | **Total** |
| Enhancing the 2030 Plan for a Green Economy<sup>(1)</sup> |  |  |  |  |  |  |  |
| Protecting water resources and ensuring the safety of dams |  | –54 | –79 | –104 | –129 | –154 | –520 |
| Protecting biodiversity and promoting access to nature | –15 | –63 | –90 | –98 | –103 | –106 | –475 |
| Recognizing and rewarding agri-environmental practices |  | –12 | –12 |  |  |  | –23 |
| **Subtotal** | **–15** | **–128** | **–181** | **–202** | **–232** | **–260** | **-1 018** |
| Revising the specific duty on new tires |  | 6 | 15 | 15 | 15 | 15 | 65 |
| **TOTAL** | **–15** | **–122** | **–166** | **–188** | **–217** | **–245** | **–953** |

---

(1) The financial framework of the 2030 Plan for a Green Economy
will benefit from an additional investment of $1.4 billion over five years compared with the current plan, thanks in particular
to additional revenue from<br>
the carbon market.

<br> Overview A.13

![](ex99-16_008.jpg)

2. Québec's economic situation

2.1 The year 2023, a period of transition before the return to sustainable growth

In recent months, inflation and the synchronized tightening of monetary policy have slowed the pace of economic activity in most regions. Thus, the global economy has entered a slowdown phase.

Global economic growth is expected to moderate, falling from 3.3% in 2022 to 2.4% in 2023.<sup>3</sup> In the United States, economic activity will drop from 2.1% in 2022 to 0.5% in 2023.

In Canada, real GDP growth is expected to be 0.8% in 2023 following a 3.4% increase in 2022.

In Québec, economic activity will decelerate from 2.8% in 2022 to 0.6% in 2023.

The year 2023 will be a period of transition. Efforts to contain the rise in prices and maintain it at a stable and predictable level could allow some major central banks to start easing their monetary policy toward the end of 2023.

— Once inflation is under control and more advantageous credit conditions have been introduced, the resumption of economic activity will accelerate starting in 2024.

In this context, the Québec economy will regain its momentum. Real GDP will grow by 1.4% in 2024.

Moreover, while future growth will come mostly from productivity gains, the aging of the population will continue to pose a challenge to accelerating Québec's economic growth.

<sup>3</sup> This section reflects economic data available as at February 28, 2023.

<br> Overview A.15

TABLE A.7<br>**Economic growth**

(real GDP, percentage change)

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **2021** | **2022** | **2023** | **2024** |
| Québec | 6.0 | 2.8 | 0.6 | 1.4 |
| Canada | 5.0 | 3.4 | 0.8 | 1.6 |
| United States | 5.9 | 2.1 | 0.5 | 1.3 |
| World<sup>(1)</sup> | 6.2 | 3.3 | 2.4 | 3.1 |

---

(1) Global real GDP is expressed in purchasing power parity.

---

| | |
|:---|:---|
| Sources: | Institut de la statistique du Québec, Statistics Canada, International Monetary Fund, S&P Global, Refinitiv Datastream, Bloomberg, Eurostat and Ministère des Finances du Québec. |

---

TABLE A.8 <br>**Real GDP and its major components in Québec**

(percentage change and contribution in percentage points)

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
|  | **Change** | **Change** | **Change** | **Contribution** | **Contribution** | **Contribution** |
| | **2022** | **2023** | **2024** | **2022** | **2023** | **2024** |
| **Domestic demand** | **2.5** | **0.6** | **1.2** | **2.6** | **0.6** | **1.3** |
| Household consumption | 4.9 | 1.6 | 1.5 | 2.9 | 1 | 0.9 |
| Residential investment | –9.7 | –7.9 | –0.1 | –0.8 | –0.6 | –0 |
| Non-residential business investment | 3.5 | 0.4 | 2.3 | 0.3 | 0 | 0.2 |
| Government spending and investment | 1.3 | 1.1 | 0.6 | 0.4 | 0.3 | 0.2 |
| **External sector** | **—** | **—** | **—** | **–1.8** | **0.4** | **0.4** |
| Exports | 2.4 | 1.5 | 3.7 | 1 | 0.7 | 1.6 |
| Imports | 5.8 | 0.6 | 2.3 | –2.8 | –0.3 | –1.2 |
| **Inventories** | **—** | **—** | **—** | **1.8** | **–0.4** | **–0.4** |
| **REAL GDP** | **2.8** | **0.6** | **1.4** | **2.8** | **0.6** | **1.4** |

---

Note: Totals may not add due to rounding.

Sources: Institut de la statistique du Québec, Statistics Canada and Ministère des Finances du Québec.

Budget 2023-2024 <br> A.16 Budget Plan

3. QuĖbec's financial situation

3.1 A smaller budgetary deficit in 2022-2023

Since the publication of Budget 2022-2023, the economic indicators affecting own-source revenue<sup>4</sup> have been adjusted favourably for 2022.

Nominal GDP has been adjusted upward by 3.3 percentage points to stand at 9.7%, compared to 6.4% projected in Budget 2022-2023.

Dynamic economic performance in 2022 has had a positive effect on own-source revenue, which has been adjusted upward by $5.1 billion in 2022-2023. In particular, corporate taxes have been adjusted upward by $2.4 billion, and personal income tax, by $1.5 billion.

After deposits in the Generations Fund,<sup>5</sup> the budgetary deficit for 2022-2023 is lower than forecast in March 2022, decreasing from nearly $6.5 billion to $5.0 billion.

---

| | | | |
|:---|:---|:---|:---|
| CHART A.1 | CHART A.1 | CHART A.2 | CHART A.2 |
| **Nominal GDP and other economic indicators ‒ 2022** | **Nominal GDP and other economic indicators ‒ 2022** | **Adjustment in 2022-2023 to own-source revenue since March 2022** | **Adjustment in 2022-2023 to own-source revenue since March 2022** |
| (percentage change) | (percentage change) | (millions of dollars) | (millions of dollars) |
| ![](ex99-16_001.jpg) | ![](ex99-16_001.jpg) | ![](ex99-16_002.jpg) | ![](ex99-16_002.jpg) |
| Note: | NOSC: net operating surplus of corporations; | Note: | OSR: own-source revenue excluding revenue |
|  | Wages: wages and salaries; |  | from government enterprises; |
|  | Consum.: household consumption excluding food |  | CT: corporate taxes; |
|  | expenditures and shelter. |  | PIT personal income tax; |
|  |  |  | HSF: contributions for health services; |
|  |  |  | DP: duties and permits. |

---

<sup>4</sup> Own-source revenue excluding revenue from government enterprises.

<sup>5</sup> Budgetary deficit before use of the stabilization reserve.

<br> Overview A.17

TABLE A.9

**Adjustments to the financial framework since March 2022**

(millions of dollars)

---

| | |
|:---|:---|
| | **2022-2023** |
| **BUDGETARY BALANCE<sup>(1)</sup> – MARCH 2022** | **-6 450** |
| **ECONOMIC AND BUDGETARY SITUATION** |  |
| Own-source revenue excluding revenue from government enterprises<sup>(2)</sup> | 5 700 |
| Revenue from government enterprises | 1 046 |
| Subtotal – Own-source revenue | 6 746 |
| Federal transfers | 436 |
| **Subtotal – Revenue** | **7 182** |
| Portfolio expenditures | –554 |
| Debt service | -1 211 |
| **Subtotal – Expenditure** | **-1 765** |
| Deposits of dedicated revenues in the Generations Fund | 94 |
| **TOTAL ADJUSTMENTS TO THE ECONOMIC AND BUDGETARY SITUATION** | **5 511** |
| **INITIATIVES SINCE BUDGET 2022-2023** | **-5 518** |
| **BUDGET 2023-2024 INITIATIVES** |  |
| Growing Québec's wealth | –502 |
| Developing the potential of youth | –34 |
| Making the health care system more effective and more humane |  |
| Supporting Quebecers | –514 |
| Diversifying and consolidating environmental measures | –15 |
| **Subtotal** | **-1 064** |
| **TOTAL INITIATIVES** | **-6 582** |
| Contingency reserve | 2 500 |
| **BUDGETARY BALANCE BEFORE USE OF THE STABILIZATION RESERVE** | **-5 021** |
| Use of the stabilization reserve<sup>(3)</sup> | 449 |
| **BUDGETARY BALANCE<sup>(1)</sup> – MARCH 2023** | **-4 572** |

---

Note: Totals may not add due to rounding.

(1) Budgetary balance within the meaning of the *Balanced Budget Act*, after use of the stabilization reserve.

(2) The total adjustment to own-source revenue is $5.1 billion,
including initiatives affecting revenue such as the 1-percentage-point decrease in the two bottom tax rates to improve Quebecers'
disposable income, which has an impact of $402 million in 2022-2023.

(3) The stabilization reserve will be fully utilized in 2022-2023,
resulting in a zero balance of the reserve as at March 31, 2023.

Budget 2023-2024 <br> A.18 Budget Plan

3.2 Financial framework

Budget 2023-2024 presents the outlook for the Québec government's revenue and expenditure until 2027-2028.

Revenue amounts to $147.7 billion in 2023-2024, with growth of 1.8%. Growth will increase to 2.8% in 2024-2025.

Over the time period of the financial framework up to 2027-2028, annual revenue growth will reach 2.9% on average.

Expenditure amounts to $147.9 billion in 2023-2024, with growth of 0.7%.<sup>6</sup> Growth will reach 2.4% in 2024-2025.

From 2023-2024 to 2027-2028, the annual growth in expenditure will be 2.1%<sup>7</sup> on average.

The financial framework includes a contingency reserve of $1.5 billion in 2023-2024, $1.0 billion in 2024-2025 and 2025-2026, and $1.5 billion in 2026-2027 and 2027-2028.

The budgetary balance, within the meaning of public accounts, shows a deficit of $1.6 billion in 2023-2024 and surpluses as of 2025-2026.

According to the definition provided in the *Balanced Budget Act*, the budgetary balance will present a deficit of $4.0 billion in 2023-2024 and will be balanced in 2027-2028.

<sup>6</sup> Excluding the impact of the COVID-19 support and recovery measures, growth in expenditure is 4.3% in 2023-2024.

<sup>7</sup> Excluding the impact of the COVID-19 support and recovery measures, annual growth in expenditure is 2.9% on average.

<br> Overview A.19

TABLE A.10

**Multi-year financial framework**

(millions of dollars)

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | **2022<br> 2023** | **2023<br> 2024** | **2024<br> 2025** | **2025<br> 2026** | **2026<br> 2027** | **2027<br> 2028** | **AAGR** **<sup>(1)</sup>** |
| **Revenue** |  |  |  |  |  |  |  |
| Personal income tax | 42 670 | 43 126 | 44 749 | 46 470 | 48 153 | 49 873 |  |
| Contributions for health services | 7 841 | 7 944 | 8 161 | 8 407 | 8 601 | 8 778 |  |
| Corporate taxes | 13 263 | 13 192 | 14 090 | 14 835 | 15 529 | 16 089 |  |
| School property tax | 1 112 | 1 184 | 1 292 | 1 374 | 1 387 | 1 432 |  |
| Consumption taxes | 26 548 | 27 290 | 28 220 | 29 080 | 29 875 | 30 739 |  |
| Duties and permits | 5 981 | 5 739 | 5 746 | 5 896 | 6 116 | 6 214 |  |
| Miscellaneous revenue | 11 784 | 12 707 | 13 112 | 13 444 | 13 922 | 14 365 |  |
| Government enterprises | 6 674 | 6 807 | 6 685 | 6 539 | 7 291 | 6 885 |  |
| **Own-source revenue** | **115 873** | **117 989** | **122 055** | **126 045** | **130 874** | **134 375** |  |
| &nbsp;&nbsp;&nbsp;***% change*** | ***5.7*** | ***1.8*** | ***3.4*** | ***3.3*** | ***3.8*** | ***2.7*** | ***3.0*** |
| Federal transfers | 29 226 | 29 742 | 29 741 | 30 908 | 32 011 | 33 197 |  |
| &nbsp;&nbsp;&nbsp;*% change* | *0.1* | *1.8* | *0.0* | *3.9* | *3.6* | *3.7* | *2.6* |
| **Total revenue** | **145 099** | **147 731** | **151 796** | **156 953** | **162 885** | **167 572** |  |
| &nbsp;&nbsp;&nbsp;***% change*** | ***4.5*** | ***1.8*** | ***2.8*** | ***3.4*** | ***3.8*** | ***2.9*** | ***2.9*** |
| **Expenditure** |  |  |  |  |  |  |  |
| Portfolio expenditures | -136 716 | -138 392 | -141 468 | -145 445 | -149 138 | -152 095 |  |
| &nbsp;&nbsp;&nbsp;*% change<sup>(2)</sup>* | *7.4* | *1.2* | *2.2* | *2.8* | *2.5* | *2.0* | *2.2* |
| Debt service | -10 053 | -9 464 | -9 925 | -9 964 | -10 516 | -11 135 |  |
| &nbsp;&nbsp;&nbsp;*% change* | *16.4* | *–5.9* | *4.9* | *0.4* | *5.5* | *5.9* | *2.1* |
| **Total expenditure** | **-146 769** | **-147 856** | **-151 393** | **-155 409** | **-159 654** | **-163 230** |  |
| &nbsp;&nbsp;&nbsp;***% change<sup>(2)</sup>*** | ***7.9*** | ***0.7*** | ***2.4*** | ***2.7*** | ***2.7*** | ***2.2*** | ***2.1*** ***<sup>(3)</sup>*** |
| Contingency reserve |  | -1 500 | -1 000 | -1 000 | -1 500 | -1 500 |  |
| **SURPLUS (DEFICIT)** | **-1 670** | **-1 625** | **-597** | **544** | **1 731** | **2 842** |  |
| ***BALANCED <br> BUDGET ACT*** |  |  |  |  |  |  |  |
| Deposits of dedicated revenues in the Generations Fund | -3 351 | -2 373 | -2 387 | -2 524 | -2 707 | -2 833 |  |
| **BUDGETARY BALANCE BEFORE USE OF THE STABILIZATION RESERVE** | **-5 021** | **-3 998** | **-2 984** | **-1 980** | **–976** | **9** |  |
| Use of the stabilization reserve | 449 |  |  |  |  |  |  |
| **BUDGETARY BALANCE** | **-4 572** | **-3 998** | **-2 984** | **-1 980** | **–976** | **9** |  |

---

Note: Totals may not add due to rounding.

(1) Average annual growth rate, corresponding to the geometric mean
over five years, from 2023-2024 to 2027-2028.

(2) Excluding the impact of the COVID-19 support and recovery measures,
portfolio expenditures will grow by 5.1% in 2023-2024 and total expenditure by 4.3%.

(3) Excluding the impact of the COVID-19 support and recovery measures,
annual growth in expenditure will be 2.9% on average.

Budget 2023-2024 <br> A.20 Budget Plan

3.3 Returning to a balanced budget

In early 2020, the pandemic caused a shock of unprecedented magnitude, sending the economy into a short but deep recession. Global economic activity quickly began to recover in a synchronized fashion, but this generated inflationary pressures that caused quick and substantial interest rate hikes.

Despite this economic volatility, the government has maintained adequate funding for the government's main missions, thereby generating deficits. With the move to a more stable economic environment, Budget 2023-2024 is an opportunity for the government to table its plan for a return to a balanced budget.

According to this plan, the deficit will be limited to $4 billion in 2023-2024, and then progressively reduced by $1 billion per year until fiscal balance is achieved in 2027-2028.

The return to a balanced budget will be achieved while:

— reducing personal income tax;

— fostering economic growth;

— adequately funding the government's missions;

— ensuring that expenditure growth is in line with revenue growth.

Sound management of public finances enables the government to eliminate the $2.8-billion deficit that was ultimately forecast in Budget 2022-2023 and to continue reducing the debt burden.

---

| |
|:---|
| CHART A.3 <br>**Change in the budgetary balance** |
| (billions of dollars) |
| ![](ex99-16_003.jpg) |

---

<br> Overview A.21

---

| |
|:---|
| **Lifting of suspension and modernization <br> of the *Balanced Budget Act*** |
| &nbsp;&nbsp; **Lifting the suspension of certain effects of the Act**<br>The *Balanced Budget Act* was amended by Bill 17,<sup>1</sup> assented to on February 24, 2022, which temporarily suspends certain effects of the Act from 2021-2022 until the end of the fiscal year determined by the Minister, that is, no later than the fiscal 2023-2024 Budget Speech.<br>The desired effects of the suspension include:<br>– the prohibition of an actual or forecast budgetary deficit;<br>– the tabling of a plan to restore fiscal balance;<br>– the obligation to implement offsetting measures for overruns.<br>In order to meet the Act's requirements, the Minister of Finance is lifting the suspension of these effects as of the end of fiscal 2022-2023.<br>As a result, the financial framework of Budget 2023-2024 includes a plan for a return to a balanced budget by 2027-2028. The plan presented, whereby the deficit will be limited to $4 billion in 2023-2024, and thereafter progressively reduced by $1 billion per year until fiscal balance is achieved, constitutes the government's plan for restoring fiscal balance.<br>– As such, the fiscal framework calls for a $1-billion decrease in the deficit in 2023-2024 compared with 2022-2023. Considering the changing revenue outlook, the expenditure level has therefore been determined so as to reduce the deficit in accordance with the requirements of the Act.<br>**Modernization of the *Balanced Budget Act***<br>Since its enactment in 1996, the *Balanced Budget Act* has been amended a number of times, essentially to suspend some of its effects during periods of recession or economic instability.<br>Since experience has revealed the difficulties of enforcing the Act in a context of major economic slowdown, Budget 2023-2024 provides an opportunity to modernize certain of its provisions.<br>The government wishes specifically to:<br>– improve fiscal flexibility in determining the fiscal balance;<br>– update the rules requiring the tabling of a plan to offset budget overruns, including the threshold and timeframe for when such a plan is required;<br>– revise the rules governing the execution of this plan, including the implementation of measures to offset overruns and the time period for offsetting overruns;<br>– abolish the stabilization reserve.<br>Proposed details will be specified at a later date.  |

---

1 *An Act respecting the implementation of certain provisions of the Budget Speech of 25 March 2021 and amending other provisions* (S.Q. 2022, c. 3).

Budget 2023-2024 <br> A.22 Budget Plan

![](ex99-16_008.jpg)

3.4 Increased investment in public infrastructure

Québec has significant public infrastructure needs. To meet them, the government is announcing an increase of $7.5 billion over 10 years under the Québec Infrastructure Plan (QIP).

The 2023-2033 QIP therefore amounts to $150.0 billion, or $15.0 billion per year on average.

Over the past five years, the QIP has been increased each year, going from $100.4 billion in March 2018 to $150.0 billion in March 2023.

These substantial investments will serve, in particular, to repair and build schools and health care institutions, maintain the road network and develop public transit infrastructure.

The financial impact of the increase in the QIP is estimated at $1.0 billion over five years, from 2023-2024 to 2027-2028. This includes the impact on portfolio expenditures and on debt service.

---

| |
|:---|
| CHART A.4 <br>**Change in the Québec Infrastructure Plan** |
| (billions of dollars) |
| &nbsp;&nbsp;![](ex99-16_004.jpg) |

---

<br> Overview A.23

![](ex99-16_008.jpg)

&nbsp;&nbsp;&nbsp;&nbsp;4. Gradually reducing the debt burden

❑ The debt burden is lower than before the pandemic

Québec has made remarkable progress in reducing its debt in recent decades. The net debt burden will stand at 37.4% of GDP as at March 31, 2023. This is lower than the pre-pandemic level, which stood at 40.0% of GDP as at March 31, 2020.

— The net debt-to-GDP ratio is expected to decline gradually starting in 2024-2025.

---

| |
|:---|
| CHART A.5<br>**Net debt as at March 31** |
| (percentage of GDP) |
| &nbsp;&nbsp; ![](ex99-16_005.jpg) |

---

However, Québec remains one of the most indebted provinces. That is why reducing the debt burden remains a priority for the government. It contributes positively to economic growth through the creation of a climate of confidence conducive to private investment and higher productivity and promotes intergenerational fairness, in particular.

<br> Overview A.25

☐ The new debt reduction objective

In view of the importance of continuing to gradually reduce the debt burden, the government is announcing a new debt reduction objective.

Net debt, which will stand at 37.4% of GDP as at March 31, 2023, will gradually be reduced to within a range of 27.5% of GDP to 32.5% of GDP within the next 15 years, that is, by fiscal year 2037-2038.<sup>8</sup>

The median net debt reduction target will stand at 30% of GDP.

Based on this target, Québec's net debt burden will therefore gradually move toward the current average net debt of the provinces (31% of GDP as at March 31, 2022).

The government also aims for the net debt burden to be 33% of GDP by 2032-2033. This is an intermediate target.

TABLE A.11

**The new debt reduction targets**

---

| | |
|:---|:---|
| Net debt by 2032-2033 (intermediate target) | 33% of GDP (±2.5% of GDP) |
| Net debt by 2037-2038 | 30% of GDP (±2.5% of GDP) |

---

The government's debt reduction strategy will rest on three key elements:

— a return to a balanced budget by 2027-2028 and the maintenance of that balance subsequently, after deposits of dedicated revenues in the Generations Fund;

— deposits in the Generations Fund, which will continue to increase starting in 2024-2025;

— accelerated economic growth, which will contribute to reducing the relative weight of the debt.

Just as it did when the Generations Fund was established in 2006, the government will continue to bank on the wealth of Québec's hydroelectricity to reduce Québec's debt. The Generations Fund will receive water-power royalties on an annual basis as well as $650 million from the dividend paid by Hydro-Québec to the government.

In 2023-2024, revenues dedicated to the Generations Fund will amount to $2.4 billion. They will gradually increase to $2.8 billion in 2027-2028,<sup>9</sup> reaching nearly $5.0 billion in 2037-2038.

Moreover, in order to reduce the financing program and alleviate debt service, withdrawals from the Generations Fund of $2.5 billion per year will be made in 2023-2024 and 2024-2025.

<sup>8</sup> Amendments to the *Act to reduce the debt and establish the Generations Fund* will be proposed for this purpose.

<sup>9</sup> The portion of the amounts provided for in the March 2022 budget that will not be deposited in the Generations Fund will be allocated to the financing of the 1 percentage-point reduction in the first two tax brackets as of 2023.

Budget 2023-2024 <br> A.26 Budget Plan

![](ex99-16_008.jpg)

5. Alternative forecast scenarios

A high degree of uncertainty surrounds the economic forecasts. As a result, although the baseline scenario forecast is balanced and similar to that of the private sector, it is not shielded from risks that could impact the economic outlook, both on the downside and the upside.

In this context, the Ministère des Finances has developed one alternative scenario forecasting a recession and another forecasting greater-than-anticipated growth, so that their impact on the financial framework and the Québec government's debt can be assessed.

☐ Two alternative economic forecast scenarios

The recession scenario reflects a more pronounced economic slowdown in the short term than forecast in the baseline scenario.

Under this scenario, economic activity would decline by 0.8% in 2023 before increasing by 0.6% in 2024. This represents a negative gap of 1.4 percentage points in 2023 and 0.8 percentage points in 2024 compared to the baseline scenario.

— This shock would be followed by a rebound in 2025 and 2026, such that real GDP would return to a level equivalent to the baseline scenario by the end of 2026.

The strong growth scenario reflects a stronger increase in economic activity than forecast in the baseline scenario.

Under this scenario, economic activity in Québec would grow by 2.0% in 2023 and 2.1% in 2024. This represents positive gaps of 1.4 percentage points in 2023 and 0.7 percentage points in 2024 compared to the baseline scenario.

— Real GDP would return to a level equivalent to the baseline scenario by the end of 2026.

TABLE A.12 <br>**Real GDP – Québec**

(percentage change, shock in percentage points)

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
|  | **Baseline<br> scenario** | **Recession<br> scenario** | **Recession<br> scenario** | **Strong growth<br> scenario** | **Strong growth<br> scenario** |
| | **Change** | **Shock** | **Change** | **Shock** | **Change** |
| 2023 | 0.6 | –1.4 | –0.8 | +1.4 | 2.0 |
| 2024 | 1.4 | –0.8 | 0.6 | +0.7 | 2.1 |
| 2025 | 1.6 | +1.1 | 2.7 | –1.1 | 0.5 |
| 2026 | 1.5 | +0.9 | 2.4 | –0.8 | 0.7 |
| 2027 | 1.4 | +0.3 | 1.7 | –0.3 | 1.1 |

---

<br> Overview A.27

☐ Impact on the financial framework and the net debt

The alternative scenarios illustrate how achieving a balanced budget could be affected if the economic situation were to take a different trajectory than that expected in Budget 2023-2024.

— If the economic situation were to deteriorate, use of the contingency reserve built into the financial framework would make it possible to avoid delaying the return to a balanced budget.

— Conversely, an improvement in the economic situation could reduce the anticipated deficits, or even allow a return to a balanced budget before 2027-2028.

---

| |
|:---|
| CHART A.6 <br>**Return to a balanced budget – Baseline scenario and alternative scenarios** |
| (billions of dollars) |
| &nbsp;&nbsp;![](ex99-16_006.jpg) |

---

Budget 2023-2024 <br> A.28 Budget Plan

![](ex99-16_008.jpg)

Under the recession scenario, the net debt-to-GDP ratio would be 1.4 percentage points higher in 2024-2025, bringing it to 38.9%.

The ratio would then gradually decline to 36.5% of GDP as at March 31, 2028, that is 0.7 percentage points of GDP or $4.9 billion higher than in the baseline scenario.

Under the strong growth scenario, the net debt-to-GDP ratio would decrease gradually each year.

As at March 31, 2028, the ratio would stand at 35.0% of GDP, or 0.8 percentage points of GDP lower than in the baseline scenario.

---

| |
|:---|
| CHART A.7<br>**Net debt as at March 31 – Baseline scenario and alternative scenarios** |
| (percentage of GDP) |
| &nbsp;&nbsp; ![](ex99-16_007.jpg) |

---

<br> Overview A.29

![](ex99-16_008.jpg)

Appendix: QuĔbec's economic outlook – 2021 to 2027

TABLE A.13 <br>**Economic outlook in Québec**

(annual average, percentage change, unless otherwise indicated)

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | **2021** | **2022** | **2023** | **2024** | **2025** | **2026** | **2027** |
| **Output** |  |  |  |  |  |  |  |
| Real GDP | 6 | 2.8 | 0.6 | 1.4 | 1.6 | 1.5 | 1.4 |
| Nominal GDP | 11.8 | 9.7 | 2.7 | 3.8 | 3.7 | 3.3 | 3.3 |
| Nominal GDP (billions of dollars) | 504.5 | 553.5 | 568.4 | 589.8 | 611.8 | 632 | 652.8 |
| **Components of GDP** (in real terms) |  |  |  |  |  |  |  |
| Final domestic demand | 6.2 | 2.5 | 0.6 | 1.2 | 1.5 | 1.2 | 1.3 |
| – Household consumption | 5.4 | 4.9 | 1.6 | 1.5 | 1.6 | 1.5 | 1.6 |
| – Government spending and investment | 5.6 | 1.3 | 1.1 | 0.6 | 1 | 0 | 0.4 |
| – Residential investment | 12.9 | -9.7 | -7.9 | -0.1 | 1 | 1 | 0.8 |
| – Non-residential business investment | 7.3 | 3.5 | 0.4 | 2.3 | 2.5 | 2.5 | 2.3 |
| Exports | 2.9 | 2.4 | 1.5 | 3.7 | 3 | 2.7 | 2.2 |
| Imports | 6.8 | 5.8 | 0.6 | 2.3 | 2 | 1.8 | 1.8 |
| **Labour market** |  |  |  |  |  |  |  |
| Population (thousands) | 8 602 | 8 696 | 8 776 | 8 843 | 8 904 | 8 956 | 9 002 |
| Population aged 15 and over (thousands) | 7 099 | 7 156 | 7 238 | 7 303 | 7 363 | 7 413 | 7 460 |
| Jobs (thousands) | 4 273 | 4 403 | 4 466 | 4 491 | 4 517 | 4 538 | 4 557 |
| Job creation (thousands) | 176.6 | 129.7 | 63.2 | 25.2 | 25.2 | 21.7 | 18.3 |
| Unemployment rate (per cent) | 6.1 | 4.3 | 4.6 | 4.2 | 4.1 | 4.1 | 4 |
| **Other economic indicators** <br> (in nominal terms) |  |  |  |  |  |  |  |
| Household consumption | 8.9 | 10.8 | 4.5 | 3.4 | 3.5 | 3.5 | 3.4 |
| – Excluding food expenditures and shelter | 11.1 | 12.5 | 4 | 3.4 | 3.5 | 3.4 | 3.4 |
| Housing starts (thousands of units) | 67.8 | 57.1 | 50.1 | 46.2 | 44.1 | 43 | 42 |
| Residential investment | 29.8 | -0.1 | -7.1 | 2 | 3.8 | 3.4 | 3 |
| Non-residential business investment | 9.5 | 10.1 | 3.8 | 3.8 | 4 | 4.2 | 4.1 |
| Wages and salaries | 10.8 | 9.9 | 3.7 | 3.4 | 3.3 | 3.1 | 2.9 |
| Household income | 5.6 | 9.2 | 3 | 3.4 | 3.2 | 3.2 | 3 |
| Net operating surplus of corporations | 8.9 | 1.5 | -4.9 | 5.3 | 3.9 | 3.5 | 3.6 |
| Consumer price index | 3.8 | 6.7 | 3.5 | 2.2 | 2 | 2 | 2 |
| – Excluding food and energy | 3 | 4.7 | 3.6 | 2.2 | 2.2 | 2.2 | 2 |

---

Sources: Institut de la statistique du Québec, Statistics Canada, Canada Mortgage and Housing Corporation and Ministère des Finances du Québec.

<br> Overview A.31

## Exhibit 99.17

------

**Exhibit 99.17**

**Section G**

**THE QUÉBEC ECONOMY: RECENT DEVELOPMENTS AND OUTLOOK FOR 2023 AND 2024**

---

| | | | |
|:---|:---|:---|:---|
| **Summary** | **Summary** | **Summary** | **G.3** |
| **1.** | **Québec's economic situation in 2023 and 2024** | **Québec's economic situation in 2023 and 2024** | **G.13** |
|  | 1.1 | Economic activity will slow before a return to more sustained growth | G.13 |
|  | 1.2 | Domestic demand will remain the main growth driver | G.15 |
|  | 1.3 | The slowdown in the economy and the aging population will curb hiring | G.16 |
|  | 1.4 | Households will exercise caution | G.19 |
|  | 1.5 | The residential sector is hit by successive interest rate hikes | G.20 |
|  | 1.6 | Non-residential investment growth will moderate | G.22 |
|  | 1.7 | Governments will continue to support the economy | G.24 |
|  | 1.8 | Export trends will be synchronized with global economic activity | G.25 |
|  | 1.9 | Inflation will continue to fall | G.26 |
|  | 1.10 | After two years of sharp increases, nominal GDP growth will be less rapid | G.28 |
|  | 1.11 | Forecasts comparable to those of the private sector | G.29 |
| **2.** | **The situation of Québec's main economic partners** | **The situation of Québec's main economic partners** | **G.31** |
|  | 2.1 | The economic situation in Canada | G.31 |
|  | 2.2 | The economic situation in the United States | G.35 |
| **3.** | **The global economic situation** | **The global economic situation** | **G.41** |
| **4.** | **Developments in financial markets** | **Developments in financial markets** | **G.49** |
| **5.** | **Main risks that may influence the forecast scenario** | **Main risks that may influence the forecast scenario** | **G.53** |

---

G.1

**Summary**

In recent months, inflation and the synchronized tightening of monetary policies have slowed the expansion of economic activity in most regions. The global economy has entered a phase of slowdown.

Global economic growth is expected to moderate from 3.3% in 2022 to 2.4% in 2023.<sup>1</sup> In the United States, economic activity will weaken from 2.1% in 2022 to 0.5% in 2023.

In Canada, real GDP growth is expected to slow from 3.4% in 2022 to 0.8% in 2023. In Québec, economic activity is forecast to grow at 2.8% in 2022 and 0.6% in 2023.

— In 2022 and 2023, economic growth will be stronger in Canada than in Québec. High oil prices will support production and investment in oil-producing provinces.

The year 2023 will be a year of transition. Controlling inflation will restore an environment conducive to sustainable growth as of 2024. In addition, the government is continuing the efforts of the past few years and prioritizing the economy, education, health and the environment. Thus, Québec's real GDP growth will be 1.4% in 2024.

---

| |
|:---|
| &nbsp;&nbsp;&nbsp;**Inflation and rapidly rising interest rates have slowed economic growth in recent months. Accordingly, economic activity in Québec is expected to slow from 2.8% in 2022 to 0.6% in 2023.** |
| &nbsp;&nbsp;&nbsp;**In 2024, controlling inflation should help restore an environment conducive to sustainable growth. In Québec, real GDP growth is expected to be 1.4%.** |

---

TABLE G.1

**Economic growth**

(real GDP, percentage change)

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **2021** | **2022** | **2023** | **2024** |
| Québec | 6.0 | 2.8 | 0.6 | 1.4 |
| Canada | 5.0 | 3.4 | 0.8 | 1.6 |
| United States | 5.9 | 2.1 | 0.5 | 1.3 |
| World<sup>(1)</sup> | 6.2 | 3.3 | 2.4 | 3.1 |

---

(1) World real GDP is expressed in purchasing power parity.

Sources: Institut de la statistique du Québec, Statistics Canada, International Monetary Fund, S&P Global, Refinitiv Datastream, Bloomberg, Eurostat and Ministère des Finances du Québec.

<sup>1</sup> Unless otherwise indicated, this section reflects economic data available as at February 28, 2023.

The Québec Economy: <br> Recent Developments and Outlook for 2023 and 2024 G.3

**☐** The year 2023, a year of transition

The year 2023 will be a year of transition for the global economy. It will be the year in which the economy moves to a more stable environment.

— In early 2020, the COVID-19 pandemic caused a shock of unprecedented magnitude, sending the economy into a short but deep recession.

Economic activity started recovering quickly. However, the sustained recovery and the imbalances between supply and demand have created an environment conducive to accelerating inflationary pressures. In addition, the war in Ukraine and fears about the global supply, of oil and grain in particular, have further supported prices.

— Over the past year, most central banks have raised policy rates rapidly and sharply to curb demand and control inflation.

The rising cost of living and deteriorating credit conditions will weigh on global economic expansion in the coming quarters.

— A majority of regions will experience a moderation or decline in economic activity in 2023.

In Québec, real GDP growth is expected to be 0.6% for the year as a whole.

However, global economic growth is forecast to accelerate toward the end of 2023.

— Over the next few months, excess demand is expected to recede and the supply of goods and services should increase, thereby easing inflationary pressures.

— The expected slowdown in price growth could allow some central banks to start easing monetary policy toward the end of 2023.

— Controlled inflation and more advantageous credit conditions will encourage the resumption of growth.

Real GDP growth should accordingly resume. In Québec, economic activity is expected to expand by 1.4% in 2024.

Efforts to contain price increases and maintain them at a stable and predictable level will help restore an environment conducive to sustainable growth.

Budget 2023-2024 <br> G.4 Budget Plan

![](ex99-17_001.jpg)

■ Outlook still clouded by uncertainty

A high degree of uncertainty hangs over the economic and financial forecasts. Over the next few years, global growth will depend on the evolution of inflation and the monetary authorities' ability to contain it.

— Despite a slight decline, global inflation remains strong.

— Prices could remain at high levels due in particular to the current labour shortage, which puts pressure on wages.

— Excess demand or tight supply of commodities as well as supply chain disruptions are also among the factors that could boost upward pressure on prices.

— Persistently high inflation could put central banks in a dilemma. Raising policy rates too high or holding them at restrictive levels for too long would have negative effects on growth. However, insufficient tightening could lead to high inflation becoming entrenched.

Moreover, the current global situation is characterized by geopolitical tensions. The intensification or worsening of these tensions could slow global economic activity more than expected.

TABLE G.2

**Consumer price index**

(percentage change)

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **2021** | **2022** | **2023** | **2024** |
| Québec | 3.8 | 6.7 | 3.5 | 2.2 |
| Canada | 3.4 | 6.8 | 3.5 | 2.3 |
| United States | 4.7 | 8.0 | 3.7 | 2.2 |
| World<sup>(1)</sup> | 4.7 | 8.8 | 6.6 | 4.3 |

---

(1) January 2023 forecast of the International Monetary Fund.

Sources: Statistics Canada, International Monetary Fund, S&P Global and Ministère des Finances du Québec.

The Québec Economy: <br> Recent Developments and Outlook for 2023 and 2024 G.5

**☐** The standard of living gap with Ontario continues to narrow

The Québec government has set ambitious objectives for creating wealth and increasing Québec's economic potential.

To this end, major steps have been taken since the fall of 2018, particularly to enhance business productivity and promote workers' integration and retention in the labour market.

— These steps are paying off. They have helped improve the standard of living for Quebecers and thus reduce the wealth gap with Ontario.

The government wishes to continue on this path and intensify its efforts to close the standard of living gap between Québec and Ontario.

**Historic progress toward closing the standard <br> of living gap between Québec and Ontario since 2018**

From 2015 to 2018, Québec's average annual growth in living standards was lower than Ontario's.

During that period, the increase in living standards averaged 1.3% annually in Québec, compared to 1.4% in Ontario.

However, since 2019, Québec has made substantial gains in relation to living standards.

– With the exception of 2020, when the COVID-19 pandemic began, changes in the standard of living have been more favourable in Québec than in Ontario.

This rapid improvement has allowed Québec to narrow the existing standard of living gap with Ontario from 16.4% in 2018 to 13.7% in 2022.

Moreover, gains will continue in the closing of the standard of living gap, despite the slowdown in economic activity.

By 2023, the standard of living gap with Ontario is expected to narrow to 12.8%.

**Standard of living**

(real GDP per capita, annual percentage change and gap in percentage points)

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **2015<br> to<br> 2018** | **2018** | **2019** | **2020** | **2021** | **2022** | **2023** | **2019<br> to<br> 2023** |
| Québec | 1.3 | 1.7 | 1.6 | -5.8 | 5.7 | 1.7 | -0.4 | 0.5 |
| Ontario | 1.4 | 1.7 | 0.4 | -5.8 | 4.6 | 1.5 | -1.1 | -0.1 |
| **GAP** | **—** | **16.4** | **15.1** | **15.0** | **13.9** | **13.7** | **12.8** | **—** |

---

Note: The Ministère des Finances du Québec does not produce a forecast for Ontario. Real GDP growth for 2022 and 2023 is the average of nine private sector institutions' forecasts as at March 2, 2023. The population forecast in 2023 is for Canada excluding Québec.

Sources: Institut de la statistique du Québec, Statistics Canada, Ontario Ministry of Finance and Ministère des Finances du Québec.

Budget 2023-2024 <br> G.6 Budget Plan

![](ex99-17_001.jpg)

■ Determinants of Québec's economic potential

The government has set itself the objective of creating wealth and increasing Québec's economic potential over the long term. It is by acting on the determinants of growth that the government will achieve this objective.

Population aging is a global phenomenon that is affecting economies to varying degrees. In Québec, this trend has accelerated in recent years and is expected to continue. As a result, the contribution of the **pool of potential workers** to economic activity growth is limited.

Labour market participation, which corresponds to the **employment rate**, will support growth in the coming years. However, Québec's employment rate for the population aged 15 to 64 is at an all-time high. In addition, population aging is limiting the growth of the labour force.

However, there are still gains to be made by promoting higher levels of graduation and workforce training, as well as by facilitating immigrant integration into the labour market. In addition, the announced reduction in personal income taxes will encourage Quebecers to increase their participation in the labour market and stay in the workforce.

Against a backdrop of aging population and a labour shortage, **productivity** gains, measured by real GDP per job, offer the greatest potential for improvement to support long-term growth. However, this component will not contribute to economic growth in the short term.

In 2021, the strong economic recovery observed boosted productivity by 1.6%, outpacing growth for the 10 years preceding the pandemic (+0.7% on average). The slowdown in economic activity combined with the rapid changes in the labour market will have a negative impact on productivity in 2022 and 2023. Starting in 2024, the pace of productivity growth will resume a dynamic pace.

TABLE G.3

**Contribution of economic growth factors in Québec**

(average annual percentage change and contribution in percentage points)

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **2010-<br> 2019** | **2020** | **2021** | **2022** | **2023** | **2024-<br> 2027** |
| **Real GDP** | **1.9** | **-5.0** | **6.0** | **2.8** | **0.6** | **1.5** |
| **Growth factor (contribution):** | **Growth factor (contribution):** | **Growth factor (contribution):** | **Growth factor (contribution):** | **Growth factor (contribution):** | **Growth factor (contribution):** | **Growth factor (contribution):** |
| – Potential labour pool<sup>(1)</sup> | 0.1 | -0.1 | -0.2 | -0.1 | 0.3 | 0 |
| – Employment rate<sup>(2)</sup> | 1 | -5.3 | 4.5 | 3.1 | 1.1 | 0.5 |
| – Productivity<sup>(3)</sup> | 0.7 | 0.4 | 1.6 | -0.3 | -0.9 | 1 |
| **STANDARD OF LIVING<sup>(4)</sup>** | **1.1** | **-5.8** | **5.7** | **1.7** | **-0.4** | **0.8** |

---

---

| | |
|:---|:---|
| Note: | Totals may not add due to rounding. |

---

(1) The potential labour pool represents the population aged 15
to 64.

(2) The employment rate corresponds to the total number of workers
in proportion to the population aged 15 to 64.

(3) Productivity represents real GDP per job.

(4) Standard of living as measured by real GDP per capita.

Sources: Institut de la statistique du Québec, Statistics Canada and Ministère des Finances du Québec.

The Québec Economy: <br> Recent Developments and Outlook for 2023 and 2024 G.7

**☐** Population aging limits the growth of the potential labour pool

Like many economies, Québec is faced with an aging population, a phenomenon that has accelerated in recent years.

Between 2012 and 2022, the Québec population aged 65 and over grew an average of 3.4% per year, amounting to an increase of 500 000 people over those 10 years. For its part, the population aged 15 to 64 did not grow.

In 2012, people aged 15 to 64 represented 68.4% of Québec's entire population. That proportion dropped to 63.6% in 2022 and is expected to decline to 60.1% by 2032. At the same time, the demographic weight of the population aged 65 and over grew from 16.1% in 2012 to 20.8% in 2022 and is expected to rise to 25.3% in 2032.

— Demographic trends are hard to reverse. The most recent demographic scenarios of the Institut de la statistique du Québec show that even under optimistic assumptions, the demographic weight of the population aged 65 and over continues to grow.

The population aged 15 to 64 makes up the main pool of potential workers. The decline in its demographic weight and the stagnation of the size of this group limit the growth of the labour force and increase tensions in the labour market.

---

| | |
|:---|:---|
| CHART G.1<br>**Demographic weight by age group<br> in Québec** | CHART G.2<br>**Demographic weight of the<br> population aged 65 and over in Québec** |
| (population share, percentage) | (population share, percentage) |
| ![](ex99-17_002.jpg) | ![](ex99-17_003.jpg) |
| Sources: Institut de la statistique du Québec, Statistics Canada and Ministère des Finances du Québec. | Sources: Institut de la statistique du Québec, Statistics Canada and Ministère des Finances du Québec. |

---

Budget 2023-2024 <br> G.8 Budget Plan

![](ex99-17_001.jpg)

**☐** Tightening of the labour pool, a challenge for Québec

Québec is confronted with the phenomenon of an aging population. In this context, increased labour market participation will be needed to support long-term economic growth.

The strong labour market raised employment rates in Québec. In 2022, employment rates in Québec rose to record highs for every cohort between the ages of 30 and 64.

— In addition, the employment rates for all age groups between the ages of 15 and 59 were higher in Québec than in Canada in 2022.

— An increase, albeit limited, in the employment rates for these age groups is still possible.

Despite this favourable performance, the employment rate of the population aged 15 years and over remained lower in Québec (61.5%) than in Canada (62.0%) in 2022. This is due to the fact that Québec has an older population. The employment rate drops quickly among the older age cohorts.

— Furthermore, employment rate gaps still exist with Canada and Ontario in respect of the population aged 60 and over. There is considerable room for improvement in these gaps.

TABLE G.4

**Employment rate by age group, 2022** 

(per cent)

---

| | | | |
|:---|:---|:---|:---|
| | **Québec** | **Canada** | **Ontario** |
| 15 to 19 years | 53.1<sup>(1)</sup> | 45.3 | 41.2 |
| 20 to 24 years | 73.1 | 70.4 | 67.3 |
| 25 to 29 years | 84.5 | 82.7<sup>(1)</sup> | 82.4 |
| 30 to 34 years | 87.2<sup>(1)</sup> | 84.8<sup>(1)</sup> | 84.2<sup>(1)</sup> |
| 35 to 39 years | 86.5<sup>(1)</sup> | 85.4<sup>(1)</sup> | 84.9<sup>(1)</sup> |
| 40 to 44 years | 89.5<sup>(1)</sup> | 86.3<sup>(1)</sup> | 84.6 |
| 45 to 49 years | 88.3<sup>(1)</sup> | 85.9<sup>(1)</sup> | 84.5 |
| 50 to 54 years | 85.6<sup>(1)</sup> | 83.3<sup>(1)</sup> | 82.8<sup>(1)</sup> |
| 55 to 59 years | 74.5<sup>(1)</sup> | 73.4<sup>(1)</sup> | 73.0<sup>(1)</sup> |
| 60 to 64 years | 50.5<sup>(1)</sup> | 53.7<sup>(1)</sup> | 55.8<sup>(1)</sup> |
| 65 to 69 years | 21.9 | 27.0 | 29.6<sup>(1)</sup> |
| 70 years and over | 6.9<sup>(1)</sup> | 7.7 | 7.8 |
| **15 to 64 years** | **77.5** **<sup>(1)</sup>** | **75.6** **<sup>(1)</sup>** | **74.5** |
| **15 years and over** | **61.5** | **62.0** | **61.8** |

---

(1) This is an annual peak since Statistics Canada began its Labour
Force Survey in 1976.

Sources: Statistics Canada and Ministère des Finances du Québec.

The Québec Economy: <br> Recent Developments and Outlook for 2023 and 2024 G.9

■ Job gains more difficult to achieve

The labour market situation has improved greatly in recent decades. Until the early 2010s, employment rates in Québec lagged significantly behind those in Ontario and Canada.

Québec's dynamic labour market has eliminated the gaps with Ontario and Canada for the main labour pool.

The employment rate of the population aged 15 to 64, namely, the proportion of the population in this group that is employed, is now higher in Québec (77.5% in 2022) than in Ontario (74.5%) and Canada (75.6%).

In an environment where the employment rate is already high, additional job gains will be more difficult to achieve.

However, gaps in employment rates among the population aged 60 and over still exist with Canada and Ontario. Thus, gains can still be made with respect to experienced workers.

In 2022, the employment rate of the population aged 60 and over in Québec (21.9%) was nearly 4 percentage points lower than in Ontario (25.8%).

— If the employment rate for experienced workers in Québec had caught up to the rate seen in Ontario in 2022, Québec would have had 86 400 additional workers.

Nearly 90% of these additional workers—76 500 people—would have come from the 60- to 69-year-old cohort.

---

| | |
|:---|:---|
| CHART G.3<br>**Employment rate for the population aged 15 to 64** | CHART G.4<br>**Employment rate in 2022 by age group** |
| (per cent) | (per cent) |
| ![](ex99-17_004.jpg) | ![](ex99-17_005.jpg) |
| Source: Statistics Canada. | Source: Statistics Canada. |

---

Budget 2023-2024 <br> G.10 Budget Plan

![](ex99-17_001.jpg)

**☐** Improved productivity

In recent years, Québec has recorded substantial productivity gains.

Between 2018 and 2023, productivity will be up 0.4% on average per year. This is a higher rate of growth than in Ontario, where productivity will be down by an average of 0.4% per year during this period.

This faster improvement in Québec narrowed the productivity gap with Ontario. The gap will fall from 16.4% in 2018 to 12.2% in 2023.

This change represents major progress. Given that employment rate increases will be more difficult in the coming years, productivity gains will be the main driver to sustain economic activity and standard of living gains.

Major steps have been taken since fall 2018 to increase Québec's economic potential. The measures introduced to improve Québec business productivity and competitiveness will narrow the standard of living gap with Ontario from 16.4% in 2018 to 12.8% in 2023.

---

| | | | |
|:---|:---|:---|:---|
| CHART G.5<br>**Change in productivity** | CHART G.5<br>**Change in productivity** | CHART G.6<br>**Change in standard of living** | CHART G.6<br>**Change in standard of living** |
| (chained 2012 dollars and gap as a percentage) | (chained 2012 dollars and gap as a percentage) | (chained 2012 dollars and gap as a percentage) | (chained 2012 dollars and gap as a percentage) |
| ![](ex99-17_006.jpg) | ![](ex99-17_006.jpg) | ![](ex99-17_007.jpg) | ![](ex99-17_007.jpg) |
| Note: | Productivity as measured by real GDP per job. The Ministère des Finances du Québec does not produce a forecast for Ontario. Real GDP growth for 2022 and 2023 is the average of nine private sector institutions' forecasts as at March 2, 2023. The employment forecast in 2023 is for Canada excluding Québec.<br>| Note: | The standard of living corresponds to real GDP per capita. The Ministère des Finances du Québec does not produce a forecast for Ontario. Real GDP growth for 2022 and 2023 is the average of nine private sector institutions' forecasts as at March 2, 2023. The population forecast in 2023 is for Canada excluding Québec.<br>|
| Sources: | Institut de la statistique du Québec, Statistics Canada, Ontario Ministry of Finance and Ministère des Finances du Québec. | Sources: | Institut de la statistique du Québec, Statistics Canada, Ontario Ministry of Finance and Ministère des Finances du Québec. |

---

The Québec Economy: <br> Recent Developments and Outlook for 2023 and 2024 G.11

■ Increasing the Québec economy's productivity is
a priority for the government

Given the labour shortage, productivity gains hold the greatest potential for improvement to support economic growth and improving the standard of living.

In order to increase the productivity of Québec's economy, in Budget 2023-2024, the government has planned initiatives totalling $887 6 million over five years aimed at:

— stimulating private investment to accelerate economic growth including:

— implementing the new tax holiday for large investment projects,

— valorizing industrial land for large-scale projects,

— optimizing the impact of Québec's tax-advantaged funds;

— stepping up efforts in innovation;

— promoting business growth, digitization and exports.

Budget 2023-2024 <br> G.12 Budget Plan

![](ex99-17_001.jpg)

1. Québec's economic situation in 2023 and 2024

1.1 Economic activity will slow before a return to more sustained growth

Since the strong growth in economic activity in the first quarter of 2022, real GDP growth has weakened.

— This moderation coincides with the beginning of the Bank of Canada's tightening cycle in March 2022, which was aimed at curbing inflationary pressures and overheating in the Canadian economy.

The year 2023 will be a year of transition. Efforts to contain price increases and maintain them at a stable and predictable level will help restore an environment conducive to sustainable growth as soon as 2024. In this context, the Québec economy will regain momentum in the second half of 2023 and in 2024.

Overall, real GDP growth is expected to be 0.6% in 2023 before rising to 1.4% in 2024.

A high degree of uncertainty is currently hanging over the economic forecasts. However, the Ministère des Finances does not expect a recession in Québec in its baseline forecast scenario.

On the other hand, while the outlook is positive, the aging population will continue<br> to pose a challenge to Québec's potential growth.

---

| |
|:---|
| CHART G.7<br>**Economic growth in Québec** |
| (real GDP, percentage change) |
| ![](ex99-17_008.jpg) |
| Sources: Institut de la statistique du Québec, Statistics Canada and Ministère des Finances du Québec. |

---

The Québec Economy: <br> Recent Developments and Outlook for 2023 and 2024 G.13

**Québec is not in a recession**

Recent statistics confirm that Québec was not in recession at the end of 2022. Economic growth continues in Québec, but at a moderate pace.

In particular, real GDP declined by 0.5% in the third quarter of 2022.

This decline is due to the negative contribution of the entire external sector (-0.6 percentage points). Exports (-0.2%) decreased and imports (+0.9%) increased.

Household consumption (+0.4%) and non-residential business investment (+0.7%) continued to expand.

Economic growth will resume, as real GDP growth by industry is up 0.7% after two months in the fourth quarter.

In addition, the labour market is surprisingly strong.

Nearly 50 000 jobs were created in the fourth quarter of 2022. Furthermore, job creation remained extremely strong in January 2023, which saw an increase of 47 400 jobs (+1.1%).

In January, the unemployment rate stood at 3.9%, an all-time monthly low.

– This strong labour market performance partly explains the resilience of household consumption.

Accordingly, a recession is not expected in Québec despite the decline in real GDP posted in the third quarter of 2022. Note that a technical recession is defined as a decline in real GDP for at least two consecutive quarters.

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **Recent economic indicators in Québec** | **Recent economic indicators in Québec** | **Recent economic indicators in Québec** | **Recent economic indicators in Québec** | **Recent economic indicators in Québec** | **Recent economic indicators in Québec** | **Recent economic indicators in Québec** | **Recent economic indicators in Québec** | **Recent economic indicators in Québec** |
| (percentage change relative to the previous period, unless otherwise indicated) | (percentage change relative to the previous period, unless otherwise indicated) | (percentage change relative to the previous period, unless otherwise indicated) | (percentage change relative to the previous period, unless otherwise indicated) | (percentage change relative to the previous period, unless otherwise indicated) | (percentage change relative to the previous period, unless otherwise indicated) | (percentage change relative to the previous period, unless otherwise indicated) | (percentage change relative to the previous period, unless otherwise indicated) | (percentage change relative to the previous period, unless otherwise indicated) |
|  |  |  |  |  | **2022-2023** | **2022-2023** | **2022-2023** | **2022-2023** |
|  | **Oct.** | **Nov.** | **Dec.** | **Jan.** | **Q3** | **Q4** | **Q1** | **Q1** **<sup>(1)</sup>** |
| Real GDP by industry | 0.6 | 0.2 |  |  | -0.5<sup>(2)</sup> | 0.7 |  |  |
| Jobs (thousands) | 17.3 | 24.3 | 4.8 | 47.4 | 9.3 | 48.5 |  | 58.7 |
| Unemployment rate (per cent) | 4.1 | 3.9 | 4.1 | 3.9 | 4.3 | 4.0 |  | 3.9 |
| Retail sales (in nominal terms) | 2.8 | -0.1 | 1.1 |  | 0.4 | 2.3 |  |  |
| Consumer price index<sup>(3)</sup> | 6.4 | 6.8 | 6.3 | 6.2 | 7.0 | 6.5 |  | 5.0 |
| Housing starts (thousands) | 55.6 | 49.7 | 34.0 | 46.4 | 54.8 | 50.4 |  | 46.4 |
| Existing home sales (thousands) | 76.3 | 74.4 | 71.7 | 68.6 | 83.5 | 74.1 |  | 68.6 |
| Manufacturing shipments (in nominal terms) | 2.5 | 0.3 | -0.8 |  | -4.1 | 3.2 |  |  |

---

(1) Cumulative for the available periods compared to the previous
year.

(2) Change in real GDP at market prices.

(3) Change from the previous year.

Sources: Institut de la statistique du Québec, Statistics Canada, Canada Mortgage and Housing Corporation and Haver Analytics.

Budget 2023-2024 <br> G.14 Budget Plan

![](ex99-17_001.jpg)

1.2 Domestic demand will remain the main growth driver

The effects of deteriorating credit conditions will continue to be felt in the economy, leading to a moderation of all components of GDP in 2023. However, growth is expected to resume in 2024.

Domestic demand will remain the main driver of real GDP growth in 2023 and 2024. It will slow substantially, however.

— The loss of purchasing power and interest-payment shock will prompt households to exercise caution. Moreover, residential investment, a GDP component that is sensitive to variations in interest rates, will dampen economic expansion.

— Businesses will face various economic headwinds. Slowing demand, high borrowing costs and heightened uncertainty are expected to moderate non-residential investment. However, the labour shortage will encourage businesses to invest in production process automation.

— In this context, governments will continue to support economic activity.

Over the next two years, the external sector will contribute positively to real GDP growth. Export growth will be higher than import growth.

— In 2023, the external sector will be affected by the difficulties facing the global economy and weaker domestic demand. Exports and imports are projected to strengthen in 2024, as the economic recovery takes root in Québec and elsewhere in the world.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| TABLE G.5<br>**Real GDP and its major components in Québec** | TABLE G.5<br>**Real GDP and its major components in Québec** | TABLE G.5<br>**Real GDP and its major components in Québec** | TABLE G.5<br>**Real GDP and its major components in Québec** | TABLE G.5<br>**Real GDP and its major components in Québec** | TABLE G.5<br>**Real GDP and its major components in Québec** | TABLE G.5<br>**Real GDP and its major components in Québec** |
| (percentage change and contribution in percentage points) | (percentage change and contribution in percentage points) | (percentage change and contribution in percentage points) | (percentage change and contribution in percentage points) | (percentage change and contribution in percentage points) | (percentage change and contribution in percentage points) | (percentage change and contribution in percentage points) |
|  | **Change** | **Change** | **Change** | **Contribution** | **Contribution** | **Contribution** |
|  | **2022** | **2023** | **2024** | **2022** | **2023** | **2024** |
| **Domestic demand** | **2.5** | **0.6** | **1.2** | **2.6** | **0.6** | **1.3** |
| Household consumption | 4.9 | 1.6 | 1.5 | 2.9 | 1 | 0.9 |
| Residential investment | -9.7 | -7.9 | -0.1 | -0.8 | -0.6 | 0 |
| Non-residential business investment | 3.5 | 0.4 | 2.3 | 0.3 | 0 | 0.2 |
| Government spending and investment | 1.3 | 1.1 | 0.6 | 0.4 | 0.3 | 0.2 |
| **External sector** | **—** | **—** | **—** | **-1.8** | **0.4** | **0.4** |
| Exports | 2.4 | 1.5 | 3.7 | 1 | 0.7 | 1.6 |
| Imports | 5.8 | 0.6 | 2.3 | -2.8 | -0.3 | -1.2 |
| **Inventories** | **—** | **—** | **—** | **1.8** | **-0.4** | **-0.4** |
| **REAL GDP** | **2.8** | **0.6** | **1.4** | **2.8** | **0.6** | **1.4** |

---

---

| | |
|:---|:---|
| Note: | Totals may not add due to rounding. |

---

Sources: Institut de la statistique du Québec, Statistics Canada and Ministère des Finances du Québec.

The Québec Economy: <br> Recent Developments and Outlook for 2023 and 2024 G.15

1.3 The slowdown in the economy and the aging population will curb hiring

The labour market remained resilient in the face of the slowdown in growth observed since last spring. Between March 2022 and January 2023, 113 400 jobs were created (+2.6%). Furthermore, the unemployment rate reached 3.9% in January 2023, a historic monthly low.

Over the coming months, the slowdown in the economy will slow the pace of hiring. Nevertheless, the tax reduction granted by the Québec government will foster the labour supply. In addition, the high number of job vacancies will limit the deterioration of the labour market.

Overall, following an average creation of 129 700 jobs in 2022 (+3.0%), 63 200 jobs (+1.4%) are expected in 2023. The unemployment rate is expected to climb temporarily to an average of 4.6% in 2023, while still remaining close to the historic annual low of 4.3% recorded in 2022.

Despite a return to sustainable economic growth in 2024, job gains will be modest. Changing demographics will limit labour force growth and lessen the potential for job creation.

As a result, 25 200 jobs (+0.6%) will be gained in 2024. At 4.2%, the unemployment rate will reach a new historic annual low.

A slowing labour market will reduce pressure on wages and salaries, which are expected to grow by 3.7% in 2023 and 3.4% in 2024, after substantial increases of 10.8% in 2021 and 9.9% in 2022.

---

| | |
|:---|:---|
| CHART G.8<br>**Job creation in Québec** | CHART G.9<br>**Unemployment rate in Québec** |
| (average annual data in thousands) | (average annual data in per cent) |
| ![](ex99-17_009.jpg) | ![](ex99-17_010.jpg) |
| Sources: Statistics Canada and Ministère des Finances du Québec. | Sources: Statistics Canada and Ministère des Finances du Québec. |

---

Budget 2023-2024 <br> G.16 Budget Plan

![](ex99-17_001.jpg)

**The Québec economy is at full employment**

The Québec labour market is surprisingly strong.

Between January 2022 and January 2023, 196 600 jobs were created in Québec, an increase of 4.6%. In comparison, Ontario saw a 4.1% rise in employment during the same period.

Labour market conditions remain exceptionally tight despite the moderation of economic growth.

Last January, the unemployment rate fell to 3.9%, a historic monthly low. This was also the lowest rate observed in any of the provinces.

The employment rate of the population aged 15 to 64 stood at 79.0% in January, the highest rate in Canada. This was also a historic monthly high.

Moreover, the number of people able to respond to the demand for labour is limited by the aging population.

The size of the population aged 15 to 64 remained relatively stable between January 2022 and January 2023 (+15 400 people, +0.3%). In comparison, the same group increased by 99 100 people (+1.0%) in Ontario during the same period.

Signs of severe tightness in the labour market are reflected in wage increases.

Between January 2022 and January 2023, the average hourly wage in Québec jumped by 6.9%. This was the strongest annual growth among the provinces, equal to that of Nova Scotia.

---

| | |
|:---|:---|
| **Employment rate for the population aged 15 to 64** | **Average hourly wage** |
| (per cent) | (percentage change between January 2022 and January 2023) |
| ![](ex99-17_011.jpg) | ![](ex99-17_012.jpg) |
| Source: Statistics Canada. | Source: Statistics Canada. |

---

The Québec Economy: <br> Recent Developments and Outlook for 2023 and 2024 G.17

**The number of job vacancies remains high**

Québec employers actively attempted to fill 232 430 job vacancies in the third quarter of 2022 (after a peak of 249 015 job vacancies in the second quarter).

The number of vacant jobs fell by 6.7% in the third quarter. This was the first fall since the third quarter of 2019.

---

| | |
|:---|:---|
| ◼ | In the third quarter of 2022, the number of vacant jobs also declined in Ontario (-3.6%) and Canada as a whole (-3.3%). |

---

Despite this decline, the number of job vacancies remains high in Québec, up 61.8% over the first quarter of 2020.

Moreover, Québec continues to be one of the provinces with the highest vacancy rates.

The vacancy rate, which is the number of vacant jobs expressed as a percentage of all vacant or occupied positions, stood at 5.8% in the third quarter of 2022.

That is the highest rate among the provinces with the exception of British Columbia (6.2%).

The high vacancy rate is mainly due to the fact that Québec has fewer potential workers who can fill available positions.

In the first quarter of 2020, Québec had 1.9 unemployed individuals per vacant job. In the third quarter of 2022, the ratio had declined to 0.9 unemployed individuals per vacation position.

– In comparison, Ontario and Canada had 1.2 and 1.1 unemployed individuals per vacant job, respectively, in the third quarter of 2022.

– Although the labour shortage affects many regions, it is more pronounced in Québec.

The high vacancy rate combined with the low unemployment rate in Québec partly explains the resilience of the labour market in recent months.

– The strong demand for workers will limit net job losses despite the moderation of economic growth.

Furthermore, the high vacancy rate will prompt businesses to step up their investments to boost labour productivity.

---

| | | | |
|:---|:---|:---|:---|
| **Number of unemployed individuals per vacant job** | **Number of unemployed individuals per vacant job** | **Number of unemployed individuals per vacant job** | **Number of unemployed individuals per vacant job** |
| (number of individuals) | (number of individuals) | (number of individuals) | (number of individuals) |
|  | **First quarter<br> of 2020** | **Third quarter<br> of 2021** | **Third quarter<br> of 2022** |
| Québec | 1.9 | 1.2 | 0.9 |
| Ontario | 2.5 | 1.9 | 1.2 |
| Canada | 2.4 | 1.7 | 1.1 |

---

Sources: Statistics Canada and Ministère des Finances du Québec.

Budget 2023-2024 <br> G.18 Budget Plan

![](ex99-17_001.jpg)

1.4 Households will exercise caution

Deteriorating credit conditions and inflation will limit consumption expenditure, which will rise by 1.6% in 2023 and 1.5% in 2024.

— The loss of purchasing power and higher mortgage payments will prompt consumers to spend prudently. At the same time, high interest rates may encourage saving.

Nevertheless, households will continue to support economic activity.

— The Québec government's personal income tax reduction will help increase household disposable income. Similarly, measures implemented since fall 2021 to protect the purchasing power of Quebecers will mitigate the effects of high inflation on their wallets.

Moreover, the financial situation of Québec households compares favourably to that of households across the country.

The savings rate in Québec averaged 11.3% in 2022, which is higher than the rate observed before the pandemic (6.5% in 2019) and higher than the rate in Canada (6.0% on average in 2022).

In addition, the household indebtedness ratio, that is, the value of their liabilities as a proportion of their disposable income, is significantly lower in Québec (152.1% in 2021) than in Canada (186.4%) and Ontario (203.3%). This means that Quebecers will be less impacted by rising interest payments given their relatively lower level of indebtedness.

---

| | |
|:---|:---|
| CHART G.10<br>**Household consumption expenditure in Québec** | CHART G.11<br>**Household indebtedness ratio** |
| (percentage change, in real terms) | (total value of liabilities divided by<br> household disposable income, in per cent) |
| ![](ex99-17_013.jpg) | ![](ex99-17_014.jpg) |
| Sources: Institut de la statistique du Québec, Statistics Canada and Ministère des Finances du Québec. | Sources: Statistics Canada and Ministère des Finances du Québec. |

---

The Québec Economy: <br> Recent Developments and Outlook for 2023 and 2024 G.19

1.5 The residential sector is hit by successive interest rate hikes

The frenzied activity observed in the residential sector in 2020 and 2021 has given way to a less tight market. After reaching a peak of $33.2 billion in 2021, residential investment shrank in 2022 (-9.7%).

Significant monetary tightening since March 2022 has led to a sharp drop in housing starts (-15.8% on average in 2022, at 57 100 units) and transactions on the resale market (-20.4% on average in 2022, at 87 100 transactions).

In 2023, residential investment will fall again (-7.9%) while the effects of deteriorating credit conditions will continue to be felt.

— High interest rates have dampened the enthusiasm of buyers on the new residential construction market and the resale market.

— Renovation spending is expected to decline for the second year in a row as many households moved up their home improvement projects during the pandemic and financing costs are high.

The gradual fall in mortgage rates, the ongoing tightness in the labour market and low inventories of unsold new properties will support residential activity in 2024. Residential investment is therefore projected to stabilize at $27.5 billion, a level that will remain higher than the average of the 10 years leading up to the pandemic.

---

| | |
|:---|:---|
| CHART G.12<br>**Residential investment in Québec** | CHART G.13<br>**Housing starts and transactions on the resale market in Québec** |
| (billions of chained 2012 dollars) | (thousands) |
| ![](ex99-17_015.jpg) | ![](ex99-17_016.jpg) |
| Sources: Institut de la statistique du Québec, Statistics Canada and Ministère des Finances du Québec. | Sources: Canada Mortgage and Housing Corporation, Haver Analytics and Ministère des Finances du Québec. |

---

Budget 2023-2024 <br> G.20 Budget Plan

![](ex99-17_001.jpg)

**Activity in the real estate market slows down after a record year**

**Housing market momentum moderates**

After reaching post-pandemic peaks, housing demand has softened. In particular, the volume of transactions on the resale market fell from 105 900 in January 2022 to 68 600 in January 2023, for a drop of 35.2%.

Multiple factors account for the moderation in housing demand.

– In particular, strong demand exerted upward pressure on prices, and mortgage interest rates rose rapidly, making properties less affordable.

Meanwhile, the supply of properties on the market has increased.

In particular, the surge in new residential construction has increased the number of available homes. Consequently, the number of new listings on the resale market rose by an average of 0.3% in 2022, the first increase since 2014.

**A market that is gradually coming into balance**

As the number of transactions declines and new listings rises, overbidding is subsiding, and home prices are gradually falling.

Since peaking at $498 300 in April 2022, the average cost of a home on the resale market has fallen by 8.1% and stood at $457 900 in January 2023.

Despite the decline in recent months, the average price of a home has remained above its pre-pandemic level ($323 600 on average in 2019).

---

| | |
|:---|:---|
| **Transactions on the resale market in Québec** | **Average home price on the resale market in Québec** |
| (thousands of units, annualized rate) | (thousands of dollars) |
| ![](ex99-17_017.jpg) | ![](ex99-17_018.jpg) |
| Source: Haver Analytics. | Source: Haver Analytics. |

---

The Québec Economy: <br> Recent Developments and Outlook for 2023 and 2024 G.21

1.6 Non-residential investment growth will moderate

Non-residential business investment is expected to grow by 0.4% in 2023, after a 3.5% increase in 2022. Investment growth will be limited in the coming quarters, in particular due to:

— less favourable credit conditions;

— slowdown in economic activity, which will dampen demand and ease pressures on production capacity;

— increased uncertainty regarding future economic conditions, which could prompt businesses to exercise caution.

However, multiple factors will support a rebound in non-residential investment in 2024 (+2.3%).

— The resumption of growth and rebound in demand will put upward pressure on production capacity.

— The anticipated pullback in interest rates will facilitate financing for expansion projects.

— The labour shortage is expected to encourage entrepreneurs to invest in machinery and equipment in order to increase their productivity and automate production.

— The transition to a low-carbon economy will have a ripple effect on business investment.

---

| | |
|:---|:---|
| CHART G.14<br>**Non-residential business investment in Québec** | CHART G.15<br>**Components of non-residential business investment in Québec** |
| (percentage change, in real terms) | (percentage change, in real terms) |
| ![](ex99-17_019.jpg) | ![](ex99-17_020.jpg) |
| Sources: Institut de la statistique du Québec, Statistics Canada and Ministère des Finances du Québec. | Sources: Institut de la statistique du Québec, Statistics Canada and Ministère des Finances du Québec. |

---

Budget 2023-2024 <br> G.22 Budget Plan

![](ex99-17_001.jpg)

**Québec among the leaders in private investment intentions in 2023**

The most recent Statistics Canada Capital and Repair Expenditures Survey (CAPEX) confirms that businesses intend to increase their investments in Québec in 2023.<sup>1</sup>

The value of total non-residential investment in the private sector in Québec is expected to amount to $29.7 billion in 2023, up 10.3% (+8.4% in 2022).

– This growth in private investment intentions places Québec third among Canadian provinces.

In Canada, the value of private non-residential investment is expected to reach $200.5 billion in 2023, up 5.2% (+8.9% in 2022).

Saskatchewan (+27.0%), Newfoundland and Labrador (+14.2%) and Québec (+10.3%) report the largest increases.

According to the survey, the main investment categories will be on the rise in Québec in 2023, as:

private investment in non-residential construction is expected to increase by 10.7% to $13.4 billion;

private investment in machinery and equipment is projected to rise by 10.0%<br> to $16.3 billion.

Statistics Canada notes that the manufacturing sector is expected to show the largest increase among all industries due to major projects planned or under way in the primary metal, chemical and transportation equipment subsectors.

---

| |
|:---|
| **Private non-residential investment by province, outlook for 2023** |
| (percentage change, in nominal terms) |
| ![](ex99-17_021.jpg) |
| Source: Statistics Canada. |

---

1 The statistics from the Capital and Repair Expenditures Survey for 2022 represent preliminary estimates. For 2023, they are investment intentions.

The Québec Economy: <br> Recent Developments and Outlook for 2023 and 2024 G.23

1.7 Governments will continue to support the economy

Following strong growth of 13.1% in 2022, the value of government investment will increase by 6.4% in 2023 and 0.4% in 2024. It is expected to reach $24.7 billion in nominal terms in 2024.

Governments are an important driver of economic activity in Québec. The value of government investment as a proportion of GDP was 4.1% in Québec in 2021, compared to 3.9% in Ontario.

In particular, investments under the 2023-2033 Québec Infrastructure Plan (QIP) are reaching record levels.

In Budget 2023-2024, the QIP will increase by $7.5 billion compared to last year. As a result, the QIP will amount to $150.0 billion over a 10-year period.

— These investments provide significant support to the economy. In particular, they make it possible to provide the population with modern, quality infrastructure.

In addition, the high levels of investment planned in Québec's major municipalities, including Montréal, Québec City and Laval, as well as the federal government's Investing in Canada Plan will support the growth in investments.

---

| |
|:---|
| CHART G.16<br>**Government investments in Québec** |
| (billions of dollars, in nominal terms) |
| ![](ex99-17_022.jpg) |

---

Note: Government investments include investments by the Québec government, the federal government, local public administrations and Aboriginal public administrations.

Sources: Institut de la statistique du Québec, Statistics Canada and Ministère des Finances du Québec.

Budget 2023-2024 <br> G.24 Budget Plan

![](ex99-17_001.jpg)

1.8 Export trends will be synchronized with global economic activity

Over the next two years, the external sector will contribute positively to real GDP growth. Export growth will be higher than import growth.

In 2023, Québec exports are expected to grow by 1.5% and imports by 0.6%, a significant slowdown compared to the 2022 increases (+2.4% and +5.8%, respectively).

— Difficulties in the global economy will curb exports.

— International exports will be impacted by the significant slowdown in global real GDP growth, including that of the United States. In addition, waning economic growth in all Canadian provinces will moderate interprovincial exports.

— Despite the slowdown in foreign demand, export growth will be sustained by the easing of supply chain tensions and a favourable exchange rate, among other things.

— Imports will decelerate in correlation with domestic demand, particularly household consumption and investment in machinery and equipment. In addition, despite a certain degree of appreciation, the relatively weak Canadian dollar is expected to continue to limit the volume of imports.

Exports (+3.7%) and imports (+2.3%) are projected to strengthen in 2024, as the economic recovery takes root.

---

| | |
|:---|:---|
| CHART G.17<br>**Québec exports** | CHART G.18<br>**Québec imports and domestic demand** |
| (percentage change, in real terms) | (percentage change, in real terms) |
| ![](ex99-17_023.jpg) | ![](ex99-17_024.jpg) |
| Sources: Institut de la statistique du Québec, Statistics Canada and Ministère des Finances du Québec. | Sources: Institut de la statistique du Québec, Statistics Canada and Ministère des Finances du Québec. |

---

The Québec Economy: <br> Recent Developments and Outlook for 2023 and 2024 G.25

1.9 Inflation will continue to fall

After peaking at 8.0% in June 2022, inflation is gradually decelerating and stood at 6.2% in January 2023.

— Several factors that fuelled high inflation are easing, particularly:

the slowdown in the rise in oil prices. The annual increase in gasoline prices fell from a peak of 61.9% in June 2022 to 4.9% in January 2023;

— In addition to reducing household expenses, the drop in oil prices lowers the cost of transporting merchandise, alleviating the pressures on the price of goods.

— the gradual easing of disruptions in supply chains, which is increasing the supply of goods;

— the slowdown in global economic activity, which is curbing demand.

Even though the inflationary surge is lessening, price growth remains high. It remains above the target range of 1% to 3% set by the Bank of Canada, which estimates that it usually takes 18 to 24 months for the effects of monetary policy adjustments to be fully reflected in the economy.

As a result, inflation will continue to moderate in the coming months as the economy adjusts to interest rate hikes. Growth in the consumer price index (CPI) is expected to fall back below the higher end (3%) of the target range as of the third quarter of 2023.

---

| | |
|:---|:---|
| CHART G.19<br>**CPI in Québec** | CHART G.20<br>**CPI in Québec** |
| (percentage change) | (annual percentage change) |
| ![](ex99-17_025.jpg) | ![](ex99-17_026.jpg) |
| Sources: Statistics Canada and Ministère des Finances du Québec. | Sources: Statistics Canada and Ministère des Finances du Québec. |

---

Budget 2023-2024 <br> G.26 Budget Plan

![](ex99-17_001.jpg)

**Downward trend in price growth for goods**

Annual inflation has decelerated since peaking in June 2022 (+8.0%). It stood at 6.2% in January 2023, the smallest change over one year since February 2022 (+5.4%).

The downward trend in the total index essentially reflects the slowdown in price growth for goods, whose annual increase dropped from 11.0% in June to 6.5% in January 2023.

– The demand for goods has been curbed in Québec and abroad by the ongoing moderation in economic activity. The decrease in demand has particularly affected durable goods, such as household appliances and furniture.

– Commodity prices have dropped significantly, particularly the price of oil. As a result, transportation costs and gasoline prices have substantially decreased from the peaks they reached in June 2022.

– Supply chain disruptions are easing, which is contributing to an increase in the supply of goods.

The annual growth in service prices is not, however, adjusting as quickly.

– The demand for services for which physical distancing is difficult jumped after the full reopening of the economy in spring 2022.

– The labour market is tight and labour costs in the service sector are experiencing robust growth.

– Price fluctuations for services linked to housing remain particularly high in connection with rising mortgage interest costs and other factors linked to housing, including rents.

Inflation related to services could prove to be more persistent. However, the anticipated economic slowdown will moderate demand. Moreover, a slowdown in job creation will ease upward pressure on wages and salaries.

---

| |
|:---|
| **Consumer price index for selected components in Québec** |
| (annual percentage change) |
| ![](ex99-17_027.jpg) |

---

Source: Statistics Canada.

The Québec Economy: <br> Recent Developments and Outlook for 2023 and 2024 G.27

1.10 After two years of sharp increases, nominal GDP growth will be less rapid

Nominal GDP growth, which is the broadest measure of the tax base, will slow down after two years of significant increases (+11.8% in 2021 and +9.7% in 2022). It is expected to stand at 2.7% in 2023 before rising to 3.8% in 2024. This slowdown will result from:

— the moderation of economic activity in real terms;

the slowdown in GDP price growth, which will increase by 2.1% and 2.4% in 2023 and 2024, respectively, after gains of 5.5% in 2021 and 6.8% in 2022.

Like nominal GDP, the government's main tax bases are expected to experience more modest growth.

After two years of increases of approximately 10%, wage and salary growth will moderate to 3.7% in 2023 and 3.4% in 2024 as job creation wanes.

— Wage gains will remain strong, however, as the labour shortage continues due to an aging population.

While high interest rates will limit nominal consumption, it will still grow by 4.5% in 2023 and 3.4% in 2024.

The net operating surplus of corporations is expected to contract by 4.9% in 2023 before returning to growth in 2024 (+5.3%). The decline expected in 2023 follows an impressive gain of 31.9% between 2019 and 2022.

The end of various business subsidy programs, significant financing costs, oil prices remaining high and salary increases will limit the growth of corporate profits. In addition, the decline in world commodity prices will translate into lower natural resource export prices, which will rein in the operating surplus of corporations.

---

| | | | | |
|:---|:---|:---|:---|:---|
| TABLE G.6<br>**Nominal GDP in Québec** | TABLE G.6<br>**Nominal GDP in Québec** | TABLE G.6<br>**Nominal GDP in Québec** | TABLE G.6<br>**Nominal GDP in Québec** | TABLE G.6<br>**Nominal GDP in Québec** |
| (percentage change) | (percentage change) | (percentage change) | (percentage change) | (percentage change) |
|  | **2021** | **2022** | **2023** | **2024** |
| Real GDP | 6.0 | 2.8 | 0.6 | 1.4 |
| Price – GDP deflator | 5.5 | 6.8 | 2.1 | 2.4 |
| **NOMINAL GDP** | **11.8** | **9.7** | **2.7** | **3.8** |

---

---

| | |
|:---|:---|
| Note: | Totals may not add due to rounding. |

---

Sources: Institut de la statistique du Québec, Statistics Canada and Ministère des Finances du Québec.

Budget 2023-2024 <br> G.28 Budget Plan

![](ex99-17_001.jpg)

1.11 Forecasts comparable to those of the private sector

In 2023, the Ministère des Finances du Québec forecasts that the increase in economic activity (+0.6%) will outpace the average anticipated by private sector forecasters (+0.3%).

In 2024, it estimates that real GDP growth (+1.4%) will outperform the average expected by private sector forecasters (+1.1%).

The large variation in private sector forecasts reflects the uncertainty arising from the current economic situation.

---

| | |
|:---|:---|
| CHART G.21<br>**Economic growth in Québec in 2023** | CHART G.22<br>**Economic growth in Québec in 2024** |
| (real GDP, percentage change) | (real GDP, percentage change) |
| ![](ex99-17_028.jpg) | ![](ex99-17_029.jpg) |
| Source: Ministère des Finances du Québec summary as at March 2, 2023, which includes the forecasts of 11 private sector institutions. | Source: Ministère des Finances du Québec summary as at March 2, 2023, which includes the forecasts of 11 private sector institutions. |

---

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| TABLE G.7<br>**Economic outlook in Québec – Comparison with the private sector** | TABLE G.7<br>**Economic outlook in Québec – Comparison with the private sector** | TABLE G.7<br>**Economic outlook in Québec – Comparison with the private sector** | TABLE G.7<br>**Economic outlook in Québec – Comparison with the private sector** | TABLE G.7<br>**Economic outlook in Québec – Comparison with the private sector** | TABLE G.7<br>**Economic outlook in Québec – Comparison with the private sector** | TABLE G.7<br>**Economic outlook in Québec – Comparison with the private sector** | TABLE G.7<br>**Economic outlook in Québec – Comparison with the private sector** |
| (percentage change) | (percentage change) | (percentage change) | (percentage change) | (percentage change) | (percentage change) | (percentage change) | (percentage change) |
|  | **2022** | **2023** | **2024** | **2025** | **2026** | **2027** | **Average<br> 2023-2027** |
| **Real GDP** |  |  |  |  |  |  |  |
| Ministère des Finances du Québec | 2.8 | 0.6 | 1.4 | 1.6 | 1.5 | 1.4 | 1.3 |
| Private sector average | 2.7 | 0.3 | 1.1 | 1.8 | 1.7 | 1.6 | 1.3 |
| **Nominal GDP** |  |  |  |  |  |  |  |
| Ministère des Finances du Québec | 9.7 | 2.7 | 3.8 | 3.7 | 3.3 | 3.3 | 3.4 |
| Private sector average | 9.3 | 2.4 | 3.2 | 3.9 | 3.6 | 3.5 | 3.3 |

---

Note: Average may not add due to rounding.

Source: Ministère des Finances du Québec summary as at March 2, 2023, which includes the forecasts of 11 privatesector institutions.

The Québec Economy: <br> Recent Developments and Outlook for 2023 and 2024 G.29

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| TABLE G.8<br>**Economic outlook in Québec** | TABLE G.8<br>**Economic outlook in Québec** | TABLE G.8<br>**Economic outlook in Québec** | TABLE G.8<br>**Economic outlook in Québec** | TABLE G.8<br>**Economic outlook in Québec** | TABLE G.8<br>**Economic outlook in Québec** | TABLE G.8<br>**Economic outlook in Québec** | TABLE G.8<br>**Economic outlook in Québec** |
| (annual average, percentage change, unless otherwise indicated) | (annual average, percentage change, unless otherwise indicated) | (annual average, percentage change, unless otherwise indicated) | (annual average, percentage change, unless otherwise indicated) | (annual average, percentage change, unless otherwise indicated) | (annual average, percentage change, unless otherwise indicated) | (annual average, percentage change, unless otherwise indicated) | (annual average, percentage change, unless otherwise indicated) |
|  | **2021** | **2022** | **2023** | **2024** | **2025** | **2026** | **2027** |
| **Output** |  |  |  |  |  |  |  |
| Real GDP | 6 | 2.8 | 0.6 | 1.4 | 1.6 | 1.5 | 1.4 |
| Nominal GDP | 11.8 | 9.7 | 2.7 | 3.8 | 3.7 | 3.3 | 3.3 |
| Nominal GDP (billions of dollars) | 504.5 | 553.5 | 568.4 | 589.8 | 611.8 | 632 | 652.8 |
| **Components of GDP** (in real terms) |  |  |  |  |  |  |  |
| Final domestic demand | 6.2 | 2.5 | 0.6 | 1.2 | 1.5 | 1.2 | 1.3 |
| – Household consumption | 5.4 | 4.9 | 1.6 | 1.5 | 1.6 | 1.5 | 1.6 |
| – Government spending and investment | 5.6 | 1.3 | 1.1 | 0.6 | 1 | 0 | 0.4 |
| – Residential investment | 12.9 | -9.7 | -7.9 | -0.1 | 1 | 1 | 0.8 |
| – Non-residential business investment | 7.3 | 3.5 | 0.4 | 2.3 | 2.5 | 2.5 | 2.3 |
| Exports | 2.9 | 2.4 | 1.5 | 3.7 | 3 | 2.7 | 2.2 |
| Imports | 6.8 | 5.8 | 0.6 | 2.3 | 2 | 1.8 | 1.8 |
| **Labour market** |  |  |  |  |  |  |  |
| Population (thousands) | 8 602 | 8 696 | 8 776 | 8 843 | 8 904 | 8 956 | 9 002 |
| Population aged 15 and over (thousands) | 7 099 | 7 156 | 7 238 | 7 303 | 7 363 | 7 413 | 7 460 |
| Jobs (thousands) | 4 273 | 4 403 | 4 466 | 4 491 | 4 517 | 4 538 | 4 557 |
| Job creation (thousands) | 176.6 | 129.7 | 63.2 | 25.2 | 25.2 | 21.7 | 18.3 |
| Unemployment rate (per cent) | 6.1 | 4.3 | 4.6 | 4.2 | 4.1 | 4.1 | 4 |
| **Other economic indicators** (in nominal terms) |  |  |  |  |  |  |  |
| Household consumption | 8.9 | 10.8 | 4.5 | 3.4 | 3.5 | 3.5 | 3.4 |
| – Excluding food expenditures and shelter | 11.1 | 12.5 | 4 | 3.4 | 3.5 | 3.4 | 3.4 |
| Housing starts (thousands of units) | 67.8 | 57.1 | 50.1 | 46.2 | 44.1 | 43 | 42 |
| Residential investment | 29.8 | -0.1 | -7.1 | 2 | 3.8 | 3.4 | 3 |
| Non-residential business investment | 9.5 | 10.1 | 3.8 | 3.8 | 4 | 4.2 | 4.1 |
| Wages and salaries | 10.8 | 9.9 | 3.7 | 3.4 | 3.3 | 3.1 | 2.9 |
| Household income | 5.6 | 9.2 | 3 | 3.4 | 3.2 | 3.2 | 3 |
| Net operating surplus of corporations | 8.9 | 1.5 | -4.9 | 5.3 | 3.9 | 3.5 | 3.6 |
| Consumer price index | 3.8 | 6.7 | 3.5 | 2.2 | 2 | 2 | 2 |
| – Excluding food and energy | 3 | 4.7 | 3.6 | 2.2 | 2.2 | 2.2 | 2 |

---

Sources: Institut de la statistique du Québec, Statistics Canada, Canada Mortgage and Housing Corporation and Ministère des Finances du Québec.

Budget 2023-2024 <br> G.30 Budget Plan

![](ex99-17_001.jpg)

2. The situation of Québec's main economic partners

Trends in exports are largely influenced by the situation of Québec's main trading partners. The value of exports of goods and services accounted for nearly 45% of nominal GDP in 2021. As a result, Québec is sensitive to fluctuations in the global economy.

— In 2023, the Québec economy will be slowed down by the decline in global growth, including in the United States and the euro area, as well as weakening economic activity in Canada.

— Global real GDP growth is projected to strengthen in 2024 in line with the expected easing in credit conditions.

2.1 The economic situation in Canada

**☐** Canada's economy will experience a year of transition

In Canada, growth is slowing. Overall, real GDP growth is expected to decline from 3.4% in 2022 to 0.8% in 2023.

— No province will escape the negative effects of high interest rates and inflation. In addition, the correction in housing markets and the deteriorating global economic environment will dampen real GDP growth.

The rise in prices is expected to fade significantly as economic activity decelerates, which could allow the Bank of Canada to ease monetary policy toward the end of 2023. Lower interest rates will provide stimulus and result in a resumption of growth in 2024 (+1.6%).

---

| |
|:---|
| CHART G.23<br>**Economic growth in Canada** |
| (real GDP, percentage change) |
| ![](ex99-17_030.jpg) |

---

Sources: Statistics Canada and Ministère des Finances du Québec.

The Québec Economy: <br> Recent Developments and Outlook for 2023 and 2024 G.31

**☐** Domestic demand will remain a source of growth

Canadian economic growth will run out of steam, falling from 3.4% in 2022 to 0.8% in 2023. Real GDP will resume an upward trend in 2024 (+1.6%) as a result of monetary policy easing.

After strong gains in 2021 and 2022, growth in domestic demand will moderate in 2023 and 2024.

— The interest-payment shock and high inflation will drive down household purchases. However, tight labour market conditions will support wage growth.

Residential investment will decline. High mortgage interest rates will keep many potential buyers out of the market. Ontario and British Columbia households will be more sensitive to the rise in borrowing costs in light of their record indebtedness ratios.

— The moderation in economic activity and resulting uncertainty will limit business investment in 2023. In 2024, business investment is expected to grow in line with strengthening demand.

Total public spending will continue to support economic activity.

Export and import growth will slow in 2023 as a result of weakening foreign and domestic demand. However, external trade is expected to rebound in 2024. As export growth will outpace import growth, the external sector will contribute significantly to real GDP growth.

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| TABLE G.9<br>**Real GDP and its major components in Canada** | TABLE G.9<br>**Real GDP and its major components in Canada** | TABLE G.9<br>**Real GDP and its major components in Canada** | TABLE G.9<br>**Real GDP and its major components in Canada** | TABLE G.9<br>**Real GDP and its major components in Canada** | TABLE G.9<br>**Real GDP and its major components in Canada** | TABLE G.9<br>**Real GDP and its major components in Canada** |
| (percentage change and contribution in percentage points) | (percentage change and contribution in percentage points) | (percentage change and contribution in percentage points) | (percentage change and contribution in percentage points) | (percentage change and contribution in percentage points) | (percentage change and contribution in percentage points) | (percentage change and contribution in percentage points) |
|  | **Change** | **Change** | **Change** | **Contribution** | **Contribution** | **Contribution** |
|  | **2022** | **2023** | **2024** | **2022** | **2023** | **2024** |
| **Domestic demand** | **2.7** | **0.7** | **1.6** | **2.6** | **0.7** | **1.6** |
| Household consumption | 4.8 | 1.7 | 2.1 | 2.5 | 0.9 | 1.2 |
| Residential investment | -11.1 | -7.5 | -0.1 | -1.1 | -0.5 | 0 |
| Non-residential business investment | 6.4 | 1 | 2.6 | 0.7 | 0.1 | 0.3 |
| Government spending and investment | 2 | 1.4 | 0.5 | 0.5 | 0.3 | 0.1 |
| **External sector** | **—** | **—** | **—** | **-1.5** | **0.8** | **0.7** |
| Exports | 2.6 | 2.4 | 4.4 | 0.9 | 0.7 | 1.3 |
| Imports | 7.2 | -0.2 | 2 | -2.3 | 0.1 | -0.7 |
| **Inventories** | **—** | **—** | **—** | **2.2** | **-0.8** | **-0.7** |
| **REAL GDP** | **3.4** | **0.8** | **1.6** | **3.4** | **0.8** | **1.6** |

---

---

| | |
|:---|:---|
| Note: | Totals may not add due to rounding. |

---

Sources: Statistics Canada and Ministère des Finances du Québec.

Budget 2023-2024 <br> G.32 Budget Plan

![](ex99-17_001.jpg)

■ Household consumption will slow down

Consumer spending is expected to grow by 1.7% in 2023 and 2.1% in 2024, following sharp increases of 5.1% in 2021 and 4.8% in 2022.

— Higher interest payments and the rising cost of living will tighten household budgets.

— However, wage gains and support measures announced by different levels of government to help households cope with inflation will ease growing financial pressures.

■ Residential investment will continue to decline

The interest rate hikes initiated by the Bank of Canada in March 2022 have hit the housing market hard.

— This has resulted in weaker demand in the new housing and resale markets, and lower renovation spending.

As a result, residential investment tumbled by 11.1% in 2022. It is expected to decline by 7.5% in 2023, and then stabilize in 2024 (-0.1%).

— Despite the sharp declines recorded since 2022, investment will remain significant. High levels of immigration are expected to support housing demand.

---

| | |
|:---|:---|
| CHART G.24<br>**Household consumption expenditure in Canada** | CHART G.25<br>**Residential investment in Canada** |
| (percentage change, in real terms) | (billions of chained 2012 dollars) |
| ![](ex99-17_031.jpg) | ![](ex99-17_032.jpg) |
| Sources: Statistics Canada and Ministère des Finances du Québec. | Sources: Statistics Canada and Ministère des Finances du Québec. |

---

The Québec Economy: <br> Recent Developments and Outlook for 2023 and 2024 G.33

■ Growth in non-residential investment will decelerate

Non-residential business investment growth will weaken amid slowing demand and high financing rates. It is expected to stand at 1.0% in 2023 before gathering pace in 2024 (+2.6%).

— Despite the current climate of uncertainty, businesses will invest in machinery and equipment due, in particular, to labour shortages. In addition, 2021 and 2022 saw record corporate earnings. The accumulated surplus will allow businesses to continue investing.

— In the energy sectors, high oil and natural gas prices will fuel investment. However, investment will be constrained by uncertainty over long-term demand amid the transition to a low-carbon economy.

■ External sector will be a major driver of economic growth

Export and import growth will cool in 2023 due to less robust external and domestic demand. However, external trade is expected to rebound in 2024.

As export growth will outpace import growth, the external sector will be a major driver of economic activity in 2023 and 2024. Export volumes will be supported, in particular, by high energy prices and increased transportation capacity, including the commissioning of new pipelines. Meanwhile, sluggish domestic demand will dampen imports.

---

| | |
|:---|:---|
| CHART G.26<br>**Non-residential business investment in Canada** | CHART G.27<br>**Exports and imports in Canada** |
| (percentage change, in real terms) | (percentage change, in real terms) |
| ![](ex99-17_033.jpg) | ![](ex99-17_034.jpg) |
| Sources: Statistics Canada and Ministère des Finances du Québec. | Sources: Statistics Canada and Ministère des Finances du Québec. |

---

Budget 2023-2024 <br> G.34 Budget Plan

![](ex99-17_001.jpg)

2.2 The economic situation in the United States

**☐** Slower U.S. economic growth in 2023 but a recovery in 2024

Following an increase of 2.1% in economic activity in 2022, U.S. real GDP growth is expected to slow significantly to 0.5% in 2023. It is then forecast to accelerate to 1.3% in 2024, while remaining below its potential.

— The sluggish growth forecast for 2023 is the lowest level since 1991, excluding the recessions of 2007-2009 and 2020.

U.S. economic growth will be constrained by lacklustre growth in domestic demand, owing, in particular, to high inflation and tighter monetary policy.

— Consumption is expected to slow, particularly as a result of less favourable household financial positions.

— Residential investment will continue to decline.

— Non-residential business investment will increase slightly.

Nevertheless, net exports are expected to contribute positively to growth in 2023.

Subsequently, an easing in inflationary pressures, lower interest rates and further supply chain improvements are expected to spur slightly stronger domestic demand, which will help accelerate growth in 2024.

---

| |
|:---|
| CHART G.28<br>**Economic growth in the United States** |
| (real GDP, percentage change) |
| ![](ex99-17_035.jpg) |

---

Sources: S&P Global and Ministère des Finances du Québec.

The Québec Economy: <br> Recent Developments and Outlook for 2023 and 2024 G.35

**☐** Temporary moderation in household consumption

Household consumption expenditure is expected to grow by 1.0% in 2023 and 1.2% in 2024, compared to 2.8% in 2022.

— It is expected to moderate, owing, in particular, to less favourable household financial positions amid significant tightening in credit conditions.

However, consumption is expected to continue to significantly support growth. Consumption stands to benefit from the savings accumulated in recent years, lower inflationary pressures and labour market conditions that remain favourable. The unemployment rate is expected to rise only slightly from 3.7% in 2022, a low not seen since 1969, to 4.0% in 2023 and to 4.6% in 2024.

**☐** Recovery in residential investment in 2024

Residential investment will tumble by 6.6% in 2023, following a 10.7% drop in 2022. It is expected to start growing again in 2024 (+1.2%).

— Mortgage interest rates, which are currently near a 20-year high, and elevated housing prices have further dampened affordability conditions, discouraging some buyers.

In 2024, the anticipated decline in mortgage rates, rising household formation and low inventories of houses are expected to support residential investment.

---

| | |
|:---|:---|
| CHART G.29<br>**Household consumption expenditure in the United States** | CHART G.30<br>**30-year mortgage rate** |
| (percentage change, in real terms) | (per cent) |
| ![](ex99-17_036.jpg) | ![](ex99-17_037.jpg) |
| Sources: S&P Global and Ministère des Finances du Québec. | Source: S&P Global. |

---

Budget 2023-2024 <br> G.36 Budget Plan

![](ex99-17_001.jpg)

**☐** Moderate increase in business investment

Non-residential business investment is expected to grow by 0.3% in 2023 (+3.8% in 2022). Investment in non-residential structures is forecast to decline, with slower investment growth anticipated in machinery and equipment and intellectual property products.

— Business investment will be constrained, in particular, by the slowdown in demand and high financing costs. In addition, concerns about the economic outlook could encourage some businesses to defer their investment projects.

— In addition, certain tax benefits granted to businesses under the December 2017 tax reform began to expire in early 2023.

However, in 2024, the improved economic outlook, more favourable financial conditions and stronger demand will support growth in business investment growth (+1.0%).

**☐** Exports will support growth in 2023

The external sector will contribute positively to GDP growth in 2023. The 2.7% rise in exports and 0.9% decline in imports will result in a net contribution of 0.4 percentage points to growth.

— The anticipated depreciation of the U.S. dollar is expected to support foreign demand while increasing the cost of imports, which will decline due to sluggish domestic demand.

In 2024, exports (+3.2%) and imports (+3.1%) are forecast to strengthen, supported by foreign and domestic demand, respectively.

---

| | |
|:---|:---|
| CHART G.31<br>**Non-residential business investment in the United States** | CHART G.32<br>**Exports and imports in the United States** |
| (percentage change, in real terms) | (percentage change, in real terms) |
| ![](ex99-17_038.jpg) | ![](ex99-17_039.jpg) |
| Sources: S&P Global and Ministère des Finances du Québec. | Sources: S&P Global and Ministère des Finances du Québec. |

---

The Québec Economy: <br> Recent Developments and Outlook for 2023 and 2024 G.37

**☐** Public spending rising anew

In 2022, spending by all levels of government declined for the first time since 2014 (-0.6%) and is expected to grow by 1.0% in 2023 and 0.7% in 2024.

Total public spending will be supported by the federal government, in particular.

It will benefit, among other things, from significant accumulated reserves by state and local governments, pandemic-related federal funding amounts that have yet to be spent by these governments and the *Infrastructure Investment and Jobs Act*.

Nevertheless, the budgetary outlook in the United States is uncertain. Congress, which has been divided since the midterm elections, has begun negotiations to raise the debt ceiling. The limit set under the previous increase in December 2021 was reached in January 2023.

However, any increase in the ceiling may be contingent on spending cuts to reduce the budgetary deficit. According to the Congressional Budget Office, the deficit is expected to reach 5.3% of GDP in 2023 and 6.1% of GDP in 2024.

— That being said, raising the debt ceiling may improve the economic climate and support growth.

---

| | |
|:---|:---|
| CHART G.33<br>**Spending by all levels of government** | CHART G.34<br>**Budgetary balances and net interest payments** |
| (percentage change, in real terms) | (percentage of nominal GDP) |
| ![](ex99-17_040.jpg) | ![](ex99-17_041.jpg) |
| Sources: S&P Global and Ministère des Finances du Québec. | Source: Congressional Budget Office. |

---

Budget 2023-2024 <br> G.38 Budget Plan

![](ex99-17_001.jpg)

**The medium-term economic impacts of the pandemic are emerging**

The COVID-19 pandemic will be remembered in history as the biggest shock to the global economy in decades. While numerous short-term impacts were felt in the economy as soon as 2020, some will take a number of years to fade.

**Shortfall of over 1 million workers in the labour market in 2023**

The Congressional Budget Office, a non-partisan agency of the U.S. Congress, analyzed the effects of the pandemic on the U.S. labour market and estimated the shortfall in workers aged 16 and over at 1.1 million in 2022.

– The labour pool shrank by more than 6 million between the end of 2019 and May 2020 due, among other things, to school and business closures, early retirements, government transfers and lower immigration.

Despite an increase in the labour force, the size of the labour pool remains lower than expected if the average participation rate observed between 2015 and 2019 is applied. According to these estimates, the shortfall in workers is expected to reach 1.3 million in 2023, the equivalent of 0.8% of employment. Nevertheless, it is expected to decline gradually by 2026, which will support growth in the medium term.

**Medium-term impacts on the commercial real estate market**

The commercial real estate market has also felt the impact of the pandemic. Prices have moderated significantly due, in particular, to higher uptake of teleworking and a rise in e-commerce. In addition, banks have tightened their credit conditions for this sector, while credit demand has weakened.

If these behavioural changes persisted, certain market segments would remain under pressure in the short and medium terms. According to some researchers at the International Monetary Fund, stricter financial conditions trigger a decline in commercial real estate prices in the following quarter.

---

| | |
|:---|:---|
| **Size of the labour force in the United States from 2022 to 2026** | **Credit conditions for the commercial real estate sector** |
| (millions of people) | (net percentage of banks) |
| ![](ex99-17_042.jpg) | ![](ex99-17_043.jpg) |

---

Note: The historical participation rate concerns the average participation rate between 2015 and 2019. Source: S&P Global. <br> Source: Congressional Budget Office.

The Québec Economy: <br> Recent Developments and Outlook for 2023 and 2024 G.39

![](ex99-17_001.jpg)

3. The global economic situation

**☐** A global economic slowdown in 2023

The global economy experienced a slowdown in 2022 after the strong recovery in 2021. In 2022, growth was limited by the central banks' efforts to counter high inflation, the war in Ukraine and China's strict containment measures following a rise in transmission of COVID-19 cases.

Global economic growth is expected to continue to slow, falling from 3.3% in 2022 to 2.4% in 2023. This slowdown will be temporary, and 2023 will be a transition period. Growth will accelerate to 3.1% in 2024.

— The ongoing war in Ukraine, high interest rates and robust inflation are expected to weigh on economic growth in 2023.

However, certain recent factors will drive global growth as of 2023 and in 2024.

— The reopening of the Chinese economy following the abandonment of the zero-COVID policy and the smaller-than-expected negative impact of the energy crisis in Europe in late 2022 and early 2023 are positive in terms of global economic growth.

— In addition, the slowdown in inflation could allow for a gradual easing of restrictive monetary policies, which should fuel growth in 2024.

---

| |
|:---|
| CHART G.35<br>**Global economic growth** |
| (real GDP in purchasing power parity, percentage change) |
| ![](ex99-17_044.jpg) |

---

Sources: International Monetary Fund, S&P Global, Refinitiv Datastream, Bloomberg, Eurostat and Ministère des Finances du Québec.

The Québec Economy: <br> Recent Developments and Outlook for 2023 and 2024 G.41

TABLE G.10

**Outlook for global economic growth**

---

| | | | | |
|:---|:---|:---|:---|:---|
| (real GDP, annual percentage change) | (real GDP, annual percentage change) | (real GDP, annual percentage change) | (real GDP, annual percentage change) | (real GDP, annual percentage change) |
|  | **Weight** **<sup>(1)</sup>** | **2022** | **2023** | **2024** |
| **World<sup>(2)</sup>** | **100.0** | **3.3** | **2.4** | **3.1** |
| **Advanced economies<sup>(2)</sup>** | **41.9** | **2.7** | **0.6** | **1.5** |
| **Québec** | **0.3** | **2.8** | **0.6** | **1.4** |
| Canada | 1.4 | 3.4 | 0.8 | 1.6 |
| United States | 15.8 | 2.1 | 0.5 | 1.3 |
| Euro area | 11.9 | 3.5 | 0.3 | 1.5 |
| – Germany | 3.3 | 1.8 | -0.1 | 1.4 |
| – France | 2.3 | 2.6 | 0.3 | 1.3 |
| – Italy | 1.9 | 3.9 | 0 | 1 |
| United Kingdom | 2.3 | 4 | -0.9 | 0.7 |
| Japan | 3.8 | 1.1 | 1.2 | 1.1 |
| **Emerging and developing economies<sup>(2)</sup>** | **58.1** | **3.8** | **3.6** | **4.3** |
| China | 18.5 | 3 | 5 | 5 |
| India<sup>(3)</sup> | 7 | 6.8 | 5.9 | 6.2 |

---

(1) Weight in global GDP in 2021.

(2) Data based on purchasing power parity.

(3) For the fiscal year (April 1 to March 31).

Sources: Institut de la statistique du Québec, Statistics Canada, International Monetary Fund, S&P Global, Refinitiv Datastream, Bloomberg, Eurostat and Ministère des Finances du Québec.

Budget 2023-2024 <br> G.42 Budget Plan

![](ex99-17_001.jpg)

**☐** Inflation has begun to slow

Price increases reached historic highs in multiple countries in 2022 due to both demand- and supply-side inflationary pressures.

In member countries of the Organisation for Economic Co-operation and Development (OECD), inflation reached 9.6% in 2022—its highest level since 1988 and a sharp increase compared to 2021.

On the demand side, the lagged effects of government support measures and the post-pandemic economic rebound contributed to inflation. On the supply side, supply chain disruptions and the war in Ukraine, which has pushed up prices for many commodities, also contributed to high inflation.

Core inflation, which excludes food and energy prices, is also very high. It is proving to be persistent due to high wage growth in strong labour markets, which is driving up business costs. In addition, in many countries, the depreciation of local currencies against the U.S. dollar is increasing import costs.

Nonetheless, global inflation is expected to have reached its peak during the third quarter of 2022. Although it remains high, it has already started to slow down. As a result, it will gradually return to more sustainable levels in 2023 and 2024.

— The effects of interest rate hikes, such as reduced demand and economic activity, as well as the easing of supply chain tensions, have contributed to the slowdown in price increases. Supply and demand rebalancing will be essential for inflation to return to central bank targets.

---

| | | | |
|:---|:---|:---|:---|
| CHART G.36<br>**Inflation in OECD member countries** | CHART G.36<br>**Inflation in OECD member countries** | CHART G.37<br>**Supply chain pressure index** | CHART G.37<br>**Supply chain pressure index** |
| (annual percentage change) | (annual percentage change) | (points) | (points) |
| ![](ex99-17_045.jpg) | ![](ex99-17_045.jpg) | ![](ex99-17_046.jpg) | ![](ex99-17_046.jpg) |
| Source: | Organisation for Economic Co-operation and Development. | Note: | Difference in standard deviations from the historical average.<br>|
|  |  | Source: | New York Federal Reserve. |

---

The Québec Economy: <br> Recent Developments and Outlook for 2023 and 2024 G.43

**☐** A more pronounced economic slowdown in advanced economies than in emerging economies

In advanced economies, real GDP will grow by 0.6% in 2023 after a 2.7% gain in 2022. In 2024, it is expected to expand by 1.5%. Current restrictive monetary policies will curb growth in 2023 and reduce inflation but will lay the foundation for sustainable economic growth in 2024.

— In the United States and the euro area, the economy is projected to slow significantly in 2023, while the United Kingdom is expected to experience a decline in its real GDP.

— On the other hand, Japan and other Asian advanced economies are expected to see relatively higher economic growth in 2023 compared to other advanced economies.

In emerging and developing economies, real GDP growth will slow from 3.8% in 2022 to 3.6% in 2023 before accelerating to 4.3% in 2024. Growth will be limited by high indebtedness, weak local currencies and the slowdown in business investment.

While slower growth is anticipated in most economies in 2023, China's real GDP growth is expected to accelerate in 2023 and stabilize in 2024. The abandonment of the zero-COVID policy and government support measures will bolster the recovery in economic activity. However, possible COVID-19 outbreaks and a weak real estate sector remain significant risks.

Economic expansion in China (+5.0%) and India (+5.9%) is expected to contribute more than half of global growth in 2023.

---

| | | | |
|:---|:---|:---|:---|
| CHART G.38 | CHART G.38 | CHART G.39<br>**Contribution to global economic growth** | CHART G.39<br>**Contribution to global economic growth** |
| **Growth in advanced and emerging economies**<br> (real GDP, percentage change) | **Growth in advanced and emerging economies**<br> (real GDP, percentage change) | (world real GDP in purchasing power parity, percentage change and contribution to growth in percentage points) | (world real GDP in purchasing power parity, percentage change and contribution to growth in percentage points) |
| ![](ex99-17_047.jpg) | ![](ex99-17_047.jpg) | ![](ex99-17_048.jpg) | ![](ex99-17_048.jpg) |
| Sources: | International Monetary Fund, S&P Global, Refinitiv Datastream, Bloomberg, Eurostat and Ministère des Finances du Québec. | Sources: | International Monetary Fund, S&P Global, Refinitiv Datastream, Bloomberg, Eurostat and Ministère des Finances du Québec. |

---

Budget 2023-2024 <br> G.44 Budget Plan

![](ex99-17_001.jpg)

**☐** A rebound in China's economic growth in 2023

Following three years of zero-COVID policy, China lifted the bulk of its health restrictions in December 2022. These restrictions had slowed economic growth significantly over the past year.

In 2020, the year COVID-19 intensified, economic activity grew by 2.2%, a nearly 50-year low.

Real GDP growth rebounded to 8.4% in 2021. Then, in 2022, real GDP growth moderated to only 3.0%.

In addition, the rapid lifting of health restrictions resulted in a sharp increase in the number of transmitted COVID-19 cases and limited economic activity at the end of 2022. However, this slowdown was temporary, as was the rise in COVID-19 cases, and economic activity has already accelerated, primarily in the service sector.

Economic growth is expected to rebound to 5.0% in 2023 and 2024, supported by improved mobility resulting from lifted health restrictions, better credit conditions, increased infrastructure spending and government measures to support the economy.

— However, the acceleration in consumption will be gradual due to the still high unemployment rate and household debt levels, as well as the real estate crisis that erupted at the end of 2021 and intensified in 2022.

---

| | | | |
|:---|:---|:---|:---|
| CHART G.40<br>**Economic growth in China** | CHART G.40<br>**Economic growth in China** | CHART G.41<br>**China's containment index** | CHART G.41<br>**China's containment index** |
| (real GDP, percentage change) | (real GDP, percentage change) | (index, 0 indicating no restrictions and 100 indicating tight restrictions) | (index, 0 indicating no restrictions and 100 indicating tight restrictions) |
| ![](ex99-17_049.jpg) | ![](ex99-17_049.jpg) | ![](ex99-17_050.jpg) | ![](ex99-17_050.jpg) |
| Sources: | Refinitiv Datastream and Ministère des Finances du Québec. | Note:<br> Source: | This represents a forecast as of January 2023. <br> S&P Global. |

---

The Québec Economy: <br> Recent Developments and Outlook for 2023 and 2024 G.45

■ Positive repercussions for the global economy in 2023

Given its relatively heavy weight in the global economy, the recovery of the Chinese economy will be crucial for global economic growth in 2023.

— China is the biggest trading partner of the European Union and many Asian countries. These economies are expected to benefit strongly from rising Chinese demand.

— In addition, Asian countries are also expected to benefit from the return of Chinese tourists.

— Supply chain tensions are projected to continue easing gradually with the zero-COVID policy being lifted.

However, the rapid rebound of the Chinese economy could fuel inflationary pressures on a global scale.

— In particular, the prices of several commodities could rise due to higher demand from China.

---

| | |
|:---|:---|
| CHART G.42<br>**China's economic growth and weight in global GDP**  | CHART G.43<br>**Weight of trade with China among trading partners** |
| (real GDP, percentage change, weight in per cent) | (percentage of the country's merchandise exports or imports, 2021) |
| ![](ex99-17_051.jpg) | ![](ex99-17_052.jpg) |
| Sources: International Monetary Fund, Refinitiv Datastream and Ministère des Finances du Québec. | Source: World Trade Organization. |

---

Budget 2023-2024 <br> G.46 Budget Plan

![](ex99-17_001.jpg)

**Demographic changes will have a significant<br> economic impact, particularly in China**

As is the case in many economies, China will see its potential economic growth slowed by various structural factors. It will suffer the effects of the decline in population, caused, in particular, by a low birth rate in recent decades.

China's total population fell in 2022, a first in six decades. India will become the most populous country in 2023.

According to the United Nations (UN), the populations of 61 countries or regions are forecast to decline by at least 1% from 2022 to 2050 due to low birth rates or high emigration.

China will also have to face an aging population.

It will not be the only country to experience this phenomenon. According to the UN, the proportion of the global population aged 65 and over is expected to grow from 10% in 2022 to 16% in 2050. In China, this proportion is expected to increase from 14% to 30% over the same period.

– Population aging will also erode the available labour pool. The decline in the labour force will affect China's competitiveness in the global market by increasing the cost of labour and the cost of goods on a global scale.

In addition to its negative impact on economic growth, the shrinking and aging population will exert pressure on public finances.

Other factors will slow long-term economic growth, in particular lower returns on capital investments and the resulting decline in productivity.

---

| | |
|:---|:---|
| **Chinese population and its share of the global population** | **Population by age group in China** |
| (population in millions of people, proportion in per cent) | (millions of people) |
| ![](ex99-17_053.jpg) | ![](ex99-17_054.jpg) |
| Sources: United Nations and Ministère des Finances du Québec. | Source: United Nations. |

---

The Québec Economy: <br> Recent Developments and Outlook for 2023 and 2024 G.47

![](ex99-17_001.jpg)

4. Developments in financial markets

**☐** The outlook for interest rates continues to have a strong influence on markets

Following 2022, a year in which most asset classes experienced significant declines, international financial markets benefitted from some renewed optimism in early 2023.

— This return in investor confidence is due, in particular, to expectations that inflation will continue to decline, which may allow central banks to pause their monetary tightening.

— These expectations have contributed to an increase in stock markets, while bond yields have fluctuated in advanced economies.

— Volatility remains high, however, as markets may quickly reassess their expectations regarding changes in interest rates based on economic statistics.

Moreover, after rallying throughout most of 2022, the U.S. dollar has generally trended downward in recent months.

Meanwhile, the prices of several commodities have been volatile since the beginning of 2023 due to global supply and demand uncertainties.

---

| | | | |
|:---|:---|:---|:---|
| CHART G.44<br>**North American stock markets** | CHART G.44<br>**North American stock markets** | CHART G.45<br>**Yield on 10-year federal bonds** | CHART G.45<br>**Yield on 10-year federal bonds** |
| (indexes, January 3, 2022 = 100) | (indexes, January 3, 2022 = 100) | (per cent) | (per cent) |
| ![](ex99-17_055.jpg) | ![](ex99-17_055.jpg) | ![](ex99-17_056.jpg) | ![](ex99-17_056.jpg) |
| Note: | Latest data as at February 28, 2023.<br>| Note: | Latest data as at February 28, 2023.<br>|
| Sources: | Bloomberg and Ministère des Finances du Québec. | Source: | Bloomberg. |

---

The Québec Economy: <br> Recent Developments and Outlook for 2023 and 2024 G.49

**☐** Bank of Canada: A pause in rate hikes

In January, the Bank of Canada raised its policy rate by 25 basis points to 4.50% and then kept it unchanged in early March. It stood at 0.25% one year ago. The effects of this exceptional monetary tightening are starting to be felt, as inflation has eased in recent months.

At the time of its most recent hike in January, the Bank of Canada announced a pause in its monetary tightening. Therefore, if the economy develops in accordance with its January outlook, the Bank will maintain the policy rate at the current level while it assesses the impact of the cumulative interest rate increases.

— In this context, the Ministère des Finances expects Canada's policy rate to remain unchanged over the coming months and that the continued moderation of inflation may allow the Bank of Canada to begin easing its monetary policy toward the end of this year.

**☐** Federal Reserve: The increase in interest rates is not over

In the United States, in February, the Federal Reserve decided to slow the pace of interest rate hikes with an increase of 25 basis points, bringing the policy rate within the range of 4.50%-4.75%.

The Federal Reserve acknowledged that progress had been made in the fight against inflation, which stood at 6.4% in January compared with the peak of 9.1% reached in June 2022. However, the institution reiterated that additional monetary tightening will be necessary to bring inflation back down to the 2% target.

— As a result, the policy rate is forecast to increase further to reach a peak in the first half of 2023 and may start to decline toward the end of this year with the anticipated slowdown in inflation.

---

| |
|:---|
| CHART G.46<br>**Policy interest rate in Canada and the United States** |
| (overnight rate target and federal funds target rate,<sup>(1)</sup> per cent) |
| ![](ex99-17_057.jpg) |

---

(1) The federal funds target rate is the midpoint of the target
range.

Sources: Statistics Canada, Bloomberg and Ministère des Finances du Québec.

Budget 2023-2024 <br> G.50 Budget Plan

![](ex99-17_001.jpg)

**☐** High bond yield volatility

Bond yields increased sharply in 2022 due to the rapid tightening of monetary policies and may have reached a peak last fall in North America.

There has been significant variability in bond yields in recent months. They pulled back slightly from last fall's levels, as the 10-year Canadian government bond yield averaged 3.2% in February, compared to 3.4% in October.

— This decline in bond yields is mainly due to market expectations that inflation will continue to moderate. The decline is also attributable to concerns over the outlook for growth, with the North American economy expected to slow significantly in 2023.

Bond yields are expected to fluctuate near their current levels in the coming quarters. On the one hand, the monetary tightening cycle in North America is expected to end in 2023. On the other hand, the inflation normalization process could have some surprises in store, which will maintain a degree of uncertainty and volatility in bond markets.

**☐** The Canadian dollar is expected to strengthen

In 2022, the Canadian dollar, like other currencies, was impacted by the strong, broad-based appreciation of the U.S. dollar. However, the U.S. dollar has generally trended downward since last fall.

— The forthcoming end of monetary tightening in the United States is expected to prompt the U.S. dollar to continue its slide against the major currencies.

— Furthermore, the improvement during the year in the growth outlook for the global and Canadian economies is expected to support the Canadian dollar, which is forecast to stand at close to 76 U.S. cents at the end of this year.

---

| | | | |
|:---|:---|:---|:---|
| **TABLE G.11<br>**Canadian financial markets**<br> (average annual percentage rate, unless otherwise indicated, end-of-year data in brackets)** | **TABLE G.11<br>**Canadian financial markets**<br> (average annual percentage rate, unless otherwise indicated, end-of-year data in brackets)** | **TABLE G.11<br>**Canadian financial markets**<br> (average annual percentage rate, unless otherwise indicated, end-of-year data in brackets)** | **TABLE G.11<br>**Canadian financial markets**<br> (average annual percentage rate, unless otherwise indicated, end-of-year data in brackets)** |
| | **2022** | **2023** | **2024** |
| Overnight rate target | 2.0 (4.3) | 4.5 (4.3) | 3.5 (3.0) |
| 3-month Treasury bill | 2.3 (4.3) | 4.4 (4.2) | 3.5 (2.9) |
| 10-year bond | 2.8 (3.3) | 3.1 (3.0) | 3.0 (3.0) |
| Canadian dollar (in U.S. cents) | 76.6 (73.8) | 75.0 (75.6) | 76.8 (78.1) |
| U.S. dollar (in Canadian dollars) | 1.31 (1.36) | 1.33 (1.32) | 1.30 (1.28) |

---

Sources: Statistics Canada, Bloomberg and Ministère des Finances du Québec.

The Québec Economy: <br> Recent Developments and Outlook for 2023 and 2024 G.51

**☐** Energy markets subject to multiple risks

As in 2022, oil prices have been volatile since the start of 2023. The price of West Texas Intermediate (WTI) averaged US$77 per barrel in February, a decline of more than 30% from the peak reached in June 2022. Oil prices are expected to remain volatile in the coming months due to economic uncertainty and persistent geopolitical tensions.

Investor concerns surrounding the global economic slowdown and the effects of interest rate hikes continue to weigh on the outlook for global oil demand, which is limiting price increases.

— However, expectations of an upturn in Chinese demand with the abandonment of the zero-COVID policy, together with the end of monetary tightening in several countries in 2023, is forecast to bolster prices in the coming quarters.

In terms of supply, the western embargo on crude oil and refined products from Russia, and the possible production adjustment by OPEC and its partners could disrupt the global oil market supply.

In addition, natural gas prices in North America and Europe have fallen by more than 60% since the end of 2022. This decline reflects weaker-than-expected demand due to particularly mild winter temperatures, the efforts made by certain countries to reduce their energy consumption and adequate inventory levels.

In short, energy prices are projected to average levels below those of last year, which will help drive down global inflation.

---

| | | | |
|:---|:---|:---|:---|
| CHART G.47 | CHART G.47 | CHART G.48<br>**Change in natural gas prices** | CHART G.48<br>**Change in natural gas prices** |
| **Change in oil prices**<br> (U.S. dollars per barrel) | **Change in oil prices**<br> (U.S. dollars per barrel) | (U.S. dollars per MMBtu in the United States and euros per MWh in Europe) | (U.S. dollars per MMBtu in the United States and euros per MWh in Europe) |
| ![](ex99-17_058.jpg) | ![](ex99-17_058.jpg) | ![](ex99-17_059.jpg) | ![](ex99-17_059.jpg) |
| Sources: | Bloomberg and Ministère des Finances du Québec. | Note: | The U.S. price is for delivery to the Henry Hub in Louisiana and the European price is for delivery to the TTF virtual trading point in the Netherlands. <br>|
|  |  | Source: | Bloomberg. |

---

Budget 2023-2024 <br> G.52 Budget Plan

![](ex99-17_001.jpg)

5. Main risks that may influence the forecast scenario

The economic and financial forecasts in *The Québec Budget Plan* – *March 2023* are based on a set of assumptions. Some of them are associated with risks that could affect the global economic and financial scenario and the anticipated developments in the Québec economy.

**☐** A different evolution of inflation

Price pressures are expected to ease gradually. If inflation persists, it could lead central banks to tighten monetary policy further or maintain high interest rates longer than forecast. In this context, the economic slowdown could be more severe than expected.

— Central banks will need to continue to be cautious. Not tightening monetary policy enough would further support price pressures and increase imbalances<br> in the economies.

— However, overtightening would exacerbate the difficulties in the sectors that are most sensitive to changes in interest rates and could lead to a severe contraction in real GDP.

A faster-than-expected slowdown in inflation could cause central banks to adopt less restrictive monetary policies or even start reducing their policy rates sooner than forecast. Such an outcome would result in stronger-than-expected economic growth.

**☐** Stronger-than-forecast economic growth in the United States

In the United States, the current scenario is already based on weak growth in real GDP in 2023 and 2024. The increased geopolitical and trade uncertainty, alongside a slower-than-expected decline in inflation, could further dampen confidence, investment and household consumption.

— A sharper or longer slowdown in U.S. economic activity could trigger a greater-than-expected slowdown in global growth given the weight of the United States in the global economy.

In contrast, the U.S. economy could prove to be more resilient. Furthermore, some statistics have been surprising since the beginning of 2023, leading some analysts to assign a higher probability to a soft-landing scenario.

— Among other things, U.S. household expenditures could turn out to be higher than forecast, with early 2023 seeing a strong recovery in sales of goods and some services.

Stronger growth in consumption, which represents 68% of U.S. GDP, could further support economic growth and would have a beneficial effect on the Québec and Canadian economies.

The Québec Economy: <br> Recent Developments and Outlook for 2023 and 2024 G.53

**☐** A more pronounced adjustment than expected in the real estate sector in Québec and Canada

The real estate market boom that took place in Québec and Canada in 2020 and 2021 resulted in an overvaluation of housing prices.

— The supply of available properties has proven to be insufficient to meet the surge in demand. This imbalance put upward pressure on prices, which reached record highs in early 2022.

— However, high prices and rising interest rates have worsened affordability, reducing demand in the process.

A larger-than-expected correction in real estate prices could occur in reaction to an increase in mortgage rates or waning demand. This could spur a greater decline than forecast in residential investment and could curb economic growth more strongly.

Such a development could generate instability in financial markets and would negatively impact the financial position of households.

**☐** Recruitment difficulties accentuated by the labour shortage

Like many developed economies, Québec is faced with an aging population, which is resulting in a shrinking pool of potential workers.

This demographic shift is putting pressure on the labour market. With the unemployment rate at a historic low and the high number of job vacancies, the labour shortage could rein in economic growth more than expected.

**☐** Stronger- or weaker-than-expected global economic growth

An economic slowdown is expected in most regions of the world. However, the moderation in global economic activity may be more pronounced than expected.

— In China, recovery could be curbed by difficulties in the real estate sector or even by production stoppages caused by waves of COVID-19 infection.

— In Europe, uncertainty is fuelled by the sharp rise in inflation, the war in Ukraine as well as the energy crisis. Fears of a recession are lurking in some countries, including Germany, which is the main economic engine of the euro area, and the United Kingdom.

Furthermore, given the weight of China (19%) and Europe (20%) in global GDP, a rapid improvement in the Chinese economy or accelerated growth in Europe would also have significant upside implications for global economic activity.

Budget 2023-2024 <br> G.54 Budget Plan

![](ex99-17_001.jpg)

**☐** An increase in geopolitical tensions

The global economy has to contend with the presence of geopolitical tensions, particularly the war in Ukraine.

— Developments in energy prices and financial markets could be affected by increased geopolitical tensions. However, the magnitude of these effects remains difficult to quantify.

— The economic and financial scenario is based on the premise that the current tensions will continue but without major spillover effects.

**☐** A different evolution of energy prices

Oil prices are expected to continue to show high volatility in the coming months but are nevertheless expected to remain at lower levels than after Russia's invasion of Ukraine in February 2022.

However, oil prices could differ from forecast levels due to various factors. These include the extent of the global economic slowdown, the strength of the recovery in China, the effects of the western embargo on Russian crude oil and refined product exports, the strategy adopted by OPEC or even increased geopolitical tensions.

— A change in oil prices would have significant effects on importing economies such as Québec's.

Furthermore, even though natural gas prices have fallen sharply in recent months, the energy crisis in Europe is far from over.

**☐** The evolution of the pandemic on a global scale

Although the global epidemiological situation has greatly improved, the World Health Organization (WHO) remains on high alert because of the continuing health risks.

— In particular, lifted health restrictions in China could lead to new waves of infection and disrupt supply chains once more.

The Québec Economy: <br> Recent Developments and Outlook for 2023 and 2024 G.55

## Exhibit 99.18

------

**Exhibit 99.18**

**Section H**

Québec's Financial Situation

---

| | | | | |
|:---|:---|:---|:---|:---|
| **Summary** | **Summary** | **Summary** | **Summary** | **H.3** |
| **1.** | **Québec's budgetary situation** | **Québec's budgetary situation** | **Québec's budgetary situation** | **H.7** |
|  | 1.1 | Recent developments in the budgetary situation | Recent developments in the budgetary situation | H.8 |
|  | 1.2 | Detailed adjustments in 2022-2023 | Detailed adjustments in 2022-2023 | H.15 |
| **2.** | **Returning to a balanced budget** | **Returning to a balanced budget** | **Returning to a balanced budget** | **H.25** |
| **3.** | **Revenue and expenditure forecasts** | **Revenue and expenditure forecasts** | **Revenue and expenditure forecasts** | **H.29** |
|  | 3.1 | Change in revenue | Change in revenue | H.30 |
|  |  | 3.1.1 | Own-source revenue excluding revenue from government enterprises | H.31 |
|  |  | 3.1.2 | Revenue from government enterprises | H.35 |
|  |  | 3.1.3 | Federal transfers | H.37 |
|  | 3.2 | Change in expenditure | Change in expenditure | H.41 |
|  |  | 3.2.1 | Portfolio expenditures | H.42 |
|  |  | 3.2.2 | Debt service | H.50 |
| **4.** | **Public infrastructure investments** | **Public infrastructure investments** | **Public infrastructure investments** | **H.53** |
| **Appendix 1:** | **Appendix 1:** | **Appendix 1:** | **Portfolio expenditures** | **H.57** |
| **Appendix 2:** | **Appendix 2:** | **Appendix 2:** | **Supplementary information** | **H.59** |

---

H.1

**Summary**

Budget 2023-2024 is an opportunity for the government to report on Québec's economic and budgetary situation and to specify its policy directions regarding public finances. This section reports on recent developments in Québec's financial situation for 2022-2023 and provides a picture of the budgetary outlook up to 2027-2028.

Since March 2022, Québec's budgetary situation has improved thanks to strong economic growth in the first few months of the year. However, inflation and rapidly rising interest rates have slowed economic growth in recent months.

&nbsp;&nbsp;&nbsp;&nbsp; <br> **The *Québec Budget Plan – March 2023* is based on balanced economic forecasts and a prudent and responsible financial framework.**<br>**The government is charting the course to return to a balanced budget by 2027-2028.**<br>

The financial framework shows favourable adjustments of $5.5 billion in 2022-2023, $6.5 billion in 2023-2024 and $7.7 billion in 2024-2025.

These adjustments are largely due to an increase in government revenue, in particular tax revenue, of $7.2 billion in 2022-2023, $7.4 billion in 2023-2024 and $8.1 billion in 2024-2025.

These increases are offset in part by an increase in portfolio expenditures and debt service of $1.8 billion in 2022-2023, $2.5 billion in 2023-2024 and $2.4 billion in 2024-2025.

These improvements allow for new initiatives of $6.6 billion in 2022-2023 and 2023-2024 followed by $7.4 billion in 2024-2025, in particular to grow Québec's wealth, develop the potential of youth and make the health care system more effective and more humane.

These amounts include the deployment of the Anti-Inflation Shield announced in the fall 2022 *Update on Québec's Economic and Financial Situation*.

In accordance with the *Balanced Budget Act*, the government will gradually eliminate the budget deficit within the next five years. The $5.0-billion deficit forecast in 2022-2023 will gradually be eliminated at a rate of $1 billion per year.

— The budgetary balance, within the meaning of public accounts, shows surpluses as of 2025-2026.

Québec's Financial <br> Situation H.3

Returning to a balanced budget will be achieved gradually while easing the tax burden on individuals, fostering economic growth and adequately funding the government's missions.

In addition, the financial framework includes a contingency reserve of $6.5 billion to offset the effects of a sharper-than-expected economic slowdown, should one occur.

The financial framework also includes stable, predictable funding for the government's key priorities.<sup>1</sup>

Spending on health and social services will grow by 7.7% in 2023-2024.

Spending on education will grow by 6.0% in 2023-2024.

Spending on higher education will grow by 5.0% in 2023-2024.

☐ Financial framework

Budget 2023-2024 presents the revenue and expenditure outlook for the Québec government until 2027-2028.

Revenue amounts to $147.7 billion in 2023-2024, with growth of 1.8%. This will increase to 2.8% in 2024-2025.

Over the horizon of the financial framework, that is, until 2027-2028, annual revenue growth will reach 2.9% on average.

Expenditure amounts to $147.9 billion in 2023-2024, with growth of 0.7%.<sup>2</sup> Growth will reach 2.4% in 2024-2025.

From 2023-2024 to 2027-2028, the annual growth in expenditure will be 2.1% on average.<sup>3</sup>

The financial framework includes a contingency reserve of $1.5 billion in 2023-2024, $1.0 billion in 2024-2025 and 2025-2026, and $1.5 billion in 2026-2027 and 2027-2028.

The budgetary balance, within the meaning of public accounts, shows a deficit of $1.6 billion in 2023-2024 and $597 million in 2024-2025, then surpluses as of 2025-2026.

According to the definition provided in the *Balanced Budget Act*, the budgetary balance presents a deficit of $4.0 billion in 2023-2024 and will be balanced in 2027-2028.

<sup>1</sup> Detailed explanations for expenditure growth are presented in subsection 3.2.

<sup>2</sup> In 2023-2024, when excluding the impact of the COVID-19 support and recovery measures, the growth in expenditures is 4.3%.

<sup>3</sup> Excluding the impact of the COVID-19 support and recovery measures, annual growth in expenditure will be 2.9% on average.

Budget 2023-2024 <br> H.4 Budget Plan

![](ex99-18_012.jpg)

TABLE H.1 <br>**Multi-year financial framework**

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) |
|  | **2022<br> 2023** | **2023<br> 2024** | **2024<br> 2025** | **2025<br> 2026** | **2026<br> 2027** | **2027<br> 2028** | **AAGR<sup>(1)</sup>** |
| **Revenue** |  |  |  |  |  |  |  |
| Personal income tax | 42 670 | 43 126 | 44 749 | 46 470 | 48 153 | 49 873 |  |
| Contributions for health services | 7 841 | 7 944 | 8 161 | 8 407 | 8 601 | 8 778 |  |
| Corporate taxes | 13 263 | 13 192 | 14 090 | 14 835 | 15 529 | 16 089 |  |
| School property tax | 1 112 | 1 184 | 1 292 | 1 374 | 1 387 | 1 432 |  |
| Consumption taxes | 26 548 | 27 290 | 28 220 | 29 080 | 29 875 | 30 739 |  |
| Duties and permits | 5 981 | 5 739 | 5 746 | 5 896 | 6 116 | 6 214 |  |
| Miscellaneous revenue | 11 784 | 12 707 | 13 112 | 13 444 | 13 922 | 14 365 |  |
| Government enterprises | 6 674 | 6 807 | 6 685 | 6 539 | 7 291 | 6 885 |  |
| **Own-source revenue** | **115 873** | **117 989** | **122 055** | **126 045** | **130 874** | **134 375** |  |
| &nbsp;&nbsp;&nbsp;***% change*** | ***5.7*** | ***1.8*** | ***3.4*** | ***3.3*** | ***3.8*** | ***2.7*** | ***3.0*** |
| Federal transfers | 29 226 | 29 742 | 29 741 | 30 908 | 32 011 | 33 197 |  |
| &nbsp;&nbsp;&nbsp;*% change* | *0.1* | *1.8* | *0.0* | *3.9* | *3.6* | *3.7* | *2.6* |
| **Total revenue** | **145 099** | **147 731** | **151 796** | **156 953** | **162 885** | **167 572** |  |
| &nbsp;&nbsp;&nbsp;***% change*** | ***4.5*** | ***1.8*** | ***2.8*** | ***3.4*** | ***3.8*** | ***2.9*** | ***2.9*** |
| **Expenditure** |  |  |  |  |  |  |  |
| Portfolio expenditures | -136 716 | -138 392 | -141 468 | -145 445 | -149 138 | -152 095 |  |
| &nbsp;&nbsp;&nbsp;*% change<sup>(2)</sup>* | *7.4* | *1.2* | *2.2* | *2.8* | *2.5* | *2.0* | *2.2* |
| Debt service | -10 053 | -9 464 | -9 925 | -9 964 | -10 516 | -11 135 |  |
| &nbsp;&nbsp;&nbsp;*% change* | *16.4* | *–5.9* | *4.9* | *0.4* | *5.5* | *5.9* | *2.1* |
| **Total expenditure** | **-146 769** | **-147 856** | **-151 393** | **-155 409** | **-159 654** | **-163 230** |  |
| &nbsp;&nbsp;&nbsp;***% change<sup>(2)</sup>*** | ***7.9*** | ***0.7*** | ***2.4*** | ***2.7*** | ***2.7*** | ***2.2*** | ***2.1*** **<sup>(3)</sup>** |
| Contingency reserve |  | -1 500 | -1 000 | -1 000 | -1 500 | -1 500 |  |
| **SURPLUS (DEFICIT)** | **-1 670** | **-1 625** | **–597** | **544** | **1 731** | **2 842** |  |

---

Note: Totals may not add due to rounding.

(1) Average annual growth rate, corresponding to the geometric mean over five years, from 2023-2024 to 2027-2028.

(2) In 2023-2024, when excluding the impact of the COVID-19 support and recovery measures, portfolio expenditures grow by 5.1% and total expenditure, by 4.3%.

(3) Excluding the impact of the COVID-19 support and recovery measures, annual growth in expenditure will be 2.9% on average.

Québec's Financial <br> Situation H.5

&nbsp;&nbsp;&nbsp;&nbsp;■ Budgetary balance within the meaning of the *Balanced Budget Act* 

Under the *Balanced Budget Act*, the budgetary balance corresponds essentially to the surplus or the deficit presented in the public accounts (book balance) reduced by the amount of revenues dedicated to the Generations Fund and adjusted to take certain accounting changes into consideration, if applicable.

For the purpose of calculating the attainment of fiscal balance, the balance must also take into account the use of the stabilization reserve, of which the sums available depend on the budgetary surpluses of previous years.

— The stabilization reserve will be fully utilized in 2022-2023, resulting in a zero balance of the reserve as at March 31, 2023.

TABLE H.2 <br>**Budgetary balance within the meaning of the *Balanced Budget Act***

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) |
|  | **2022-<br> 2023** | **2023-**<br> **2024**  | **2024-**<br> **2025**  | **2025-**<br> **2026**  | **2026-**<br> **2027**  | **2027-**<br> **2028**  |
| **SURPLUS (DEFICIT)** | **-1 670** | **-1 625** | **–597** | **544** | **1 731** | **2 842** |
| Deposits of dedicated revenues in the Generations Fund | -3 351 | -2 373 | -2 387 | -2 524 | -2 707 | -2 833 |
| **BUDGETARY BALANCE BEFORE USE OF THE STABILIZATION RESERVE** | **-5 021** | **-3 998** | **-2 984** | **-1 980** | **–976** | **9** |
| Use of the stabilization reserve | 449 |  |  |  |  |  |
| **BUDGETARY BALANCE WITHIN THE MEANING OF THE *BALANCED BUDGET ACT*** | **-4 572** | **-3 998** | **-2 984** | **-1 980** | **-976** | **9** |

---

Note: Totals may not add due to rounding.

Budget 2023-2024 <br> H.6 Budget Plan

![](ex99-18_012.jpg)

1. Québec's budgetary situation

In 2023-2024, the budgetary balance shows a deficit of $4.0 billion.

Revenue stands at $147.7 billion.

Portfolio expenditures, or expenditures tied to the delivery of public services, stand at $138.4 billion.

Debt service amounts to $9.5 billion.

A contingency reserve of $1.5 billion is included in the financial framework due to the uncertainty affecting the economic context and to offset the effects of a sharper-than-expected economic slowdown, should one occur.

Deposits of dedicated revenues in the Generations Fund total $2.4 billion.

TABLE H. 3 <br>**Québec's budget – March 2023**

---

| | |
|:---|:---|
| (millions of dollars) | (millions of dollars) |
|  | **2023-2024** |
| **Revenue** |  |
| Own-source revenue | 117 989 |
| &nbsp;&nbsp;&nbsp;*% change* | *1.8* |
| Federal transfers | 29 742 |
| &nbsp;&nbsp;&nbsp;*% change* | *1.8* |
| **Total revenue** | **147 731** |
| &nbsp;&nbsp;&nbsp;***% change*** | ***1.8*** |
| **Expenditure** |  |
| Portfolio expenditures | -138 392 |
| &nbsp;&nbsp;&nbsp;*% change* | *1.2* |
| Debt service | -9 464 |
| &nbsp;&nbsp;&nbsp;*% change* | *–5.9* |
| **Total expenditure** | **-147 856** |
| &nbsp;&nbsp;&nbsp;***% change*** | ***0.7*** |
| Contingency reserve | -1 500 |
| **SURPLUS (DEFICIT)** | **-1 625** |
| ***BALANCED BUDGET ACT*** |  |
| Deposits of dedicated revenues in the Generations Fund | -2 373 |
| **BUDGETARY BALANCE** | **-3 998** |

---

Québec's Financial <br> Situation H.7

1.1 Recent developments in the budgetary situation

The favourable revenue adjustments for the period covered by the financial framework make it possible, in particular, to return to a balanced budget in 2027-2028, while supporting economic growth and wealth creation.

— However, although the Ministère des Finances is not forecasting a recession, a slowdown in Québec's economic activity is expected in 2023.

☐ Main adjustments from 2022-2023 to 2024-2025

Since Budget 2022-2023, the financial framework presents improvements of $6.6 billion on average from 2022-2023 to 2024-2025.

For this period, the government is providing for new initiatives of $6.6 billion in 2022-2023 and 2023-2024 followed by $7.4 billion in 2024-2025, notably to grow Québec's wealth, develop the potential of youth and make the health care system more effective and more humane.

These amounts include the deployment of the Anti-Inflation Shield announced in the fall 2022 *Update on Québec's Economic and Financial Situation*.

Deposits of dedicated revenues in the Generations Fund will experience more moderate growth, mainly due to the planned amendments regarding the sources of revenue dedicated to the Generations Fund as of 2023-2024.

Budget 2023-2024 <br> H.8 Budget Plan

![](ex99-18_012.jpg)

TABLE H.4 <br>**Adjustments to the financial framework since March 2022**

---

| | | | |
|:---|:---|:---|:---|
| (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) |
|  | **2022-2023** | **2023-2024** | **2024-2025** |
| **BUDGETARY BALANCE<sup>(1)</sup> – MARCH 2022** | **-6 450** | **-3 900** | **-3 750** |
| **ECONOMIC AND BUDGETARY SITUATION** |  |  |  |
| Own-source revenue excluding revenue from government enterprises |  |  |  |
| – Tax revenue | 4 754 | 5 352 | 5 778 |
| – Other revenue | 946 | 1 010 | 858 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subtotal | 5 700 | 6 361 | 6 636 |
| Revenue from government enterprises | 1 046 | 1 074 | 860 |
| Subtotal – Own-source revenue | 6 746 | 7 435 | 7 496 |
| Federal transfers | 436 | –6 | 623 |
| **Subtotal – Revenue** | **7 182** | **7 429** | **8 119** |
| Portfolio expenditures | –554 | -1 740 | -1 295 |
| Debt service | -1 211 | –739 | -1 132 |
| **Subtotal – Expenditure** | **-1 765** | **-2 479** | **-2 427** |
| Deposits of dedicated revenues in the Generations Fund | 94 | 1 562 | 1 993 |
| **TOTAL ADJUSTMENTS TO THE ECONOMIC AND BUDGETARY SITUATION** | **5 511** | **6 512** | **7 685** |
| **INITIATIVES SINCE BUDGET 2022-2023<sup>(2)</sup>** | **-5 518** | **-2 287** | **-2 535** |
| **BUDGET 2023-2024 INITIATIVES** |  |  |  |
| Growing Québec's wealth | –502 | -2 081 | -2 311 |
| Developing the potential of youth | –34 | –345 | –499 |
| Making the health care system more effective and more humane |  | –1 034 | –1 135 |
| Supporting Quebecers | –514 | –740 | –773 |
| Diversifying and consolidating environmental measures | –15 | –122 | –166 |
| **Subtotal** | **-1 064** | **-4 323** | **-4 885** |
| **TOTAL INITIATIVES** | **-6 582** | **-6 610** | **-7 419** |
| Contingency reserve | 2 500 |  | 500 |
| **BUDGETARY BALANCE BEFORE USE OF THE STABILIZATION RESERVE** | **-5 021** | **-3 998** | **-2 984** |
| Use of the stabilization reserve<sup>(3)</sup> | 449 |  |  |
| **BUDGETARY BALANCE<sup>(1)</sup> – MARCH 2023** | **-4 572** | **-3 998** | **-2 984** |

---

Note: Totals may not add due to rounding.

(1) Budgetary balance within the meaning of the *Balanced Budget Act*, after use of the stabilization reserve.

(2) The initiatives since Budget 2022-2023 include the measures announced in the August 2022 pre-election report and the fall 2022 *Update on Québec's Economic and Financial Situation*.

(3) The stabilization reserve will be fully utilized in 2022-2023, resulting in a zero balance of the reserve as at March 31, 2023.

Québec's Financial <br> Situation H.9

&nbsp;&nbsp;&nbsp;&nbsp;⑤ Adjustments related to the economic and budgetary situation

Compared to March 2022, improvements of $5.5 billion in 2022-2023, $6.5 billion in 2023-2024 and $7.7 billion in 2024-2025 are included in the financial framework. These improvements are explained, in particular, by:

an increase in own-source revenue, excluding revenue from government enterprises, of $5.7 billion in 2022-2023, $6.4 billion in 2023-2024 and $6.6 billion in 2024-2025, derived mainly from personal income tax, corporate taxes and revenue from duties and permits;

a favourable adjustment to revenue from government enterprises of $1.0 billion in 2022-2023, $1.1 billion in 2023-2024 and $860 million in 2024-2025;

— For 2022-2023, the adjustments come primarily from the increase in the value of Hydro-Québec's electricity exports, which are offset by a decrease in Investissement Québec's anticipated results, due to the downturn in financial markets since March 2022.

— For 2023-2024 and 2024-2025, the adjustments are essentially due to the variations in Hydro-Québec's results stemming from the increase in the value of its electricity exports and the value of sales in Québec.

a $436-million increase in federal transfers in 2022-2023, resulting, among other things, from a one-time $450-million payment to eliminate the backlog of surgeries, followed by a $6-million decrease in 2023-2024 and a $623-million increase in 2024-2025;

These adjustments include the additional health funding announced by the federal government on February 7, 2023 ($4.7 billion over five years for Québec from 2023-2024 to 2027-2028).

— an increase in portfolio expenditures:

of $554 million in 2022-2023, stemming notably, from the increased spending to overcome the public health crisis and downward adjustments<br> to the spending of certain bodies,

of $1.7 billion in 2023-2024 and $1.3 billion in 2024-2025 due to the projected indexation of expenditures, population growth and investments provided for in the Québec Infrastructure Plan;

Budget 2023-2024 <br> H.10 Budget Plan

![](ex99-18_012.jpg)

an increase in debt service of $1.2 billion in 2022-2023, $739 million in 2023-2024 and $1.1 billion in 2024-2025, due to higher-than-anticipated interest rates and a downward adjustment of the expected return on the Retirement Plans Sinking Fund (RPSF) in 2022-2023;

a $94-million decrease in deposits in the Generations Fund in 2022-2023 due to lower-than-anticipated investment income, followed by decreases of $1.6 billion in 2023-2024 and $2.0 billion in 2024-2025 due to the planned amendments regarding the sources of revenue dedicated to the Generations Fund as of 2023-2024.

&nbsp;&nbsp;&nbsp;&nbsp;⑤ Budget 2023-2024 initiatives

In this budget, the government is providing initiatives of nearly $4.3 billion for 2023-2024, that is:

$2.1 billion to grow Québec's wealth;

$345 million to develop the potential of youth;

$1.0 billion to make the health care system more effective and more humane;

$740 million to support Quebecers;

$122 million to diversify and consolidate environmental measures.

The total cost of the initiatives since Budget 2022-2023 is $6.6 billion in 2022-2023 and 2023-2024 and $7.4 billion in 2024-2025.

Québec's Financial <br> Situation H.11

**Recap of the December 2022 initiatives**

In the December 2022 *Update on Québec's Economic and Financial Situation*, the government announced initiatives totalling $5.4 billion for 2022-2023, namely:

$5.1 billion to implement the Anti-Inflation Shield;

$244 million to improve housing affordability;

$53 million to strengthen security in Montréal.

These initiatives will total $2.1 billion in 2023-2024 and $2.4 billion in 2024-2025.

**December 2022 initiatives**

---

| | | | |
|:---|:---|:---|:---|
| (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) |
|  | **2022-2023** | **2023-2024** | **2024-2025** |
| **Implementing the Anti-Inflation Shield** |  |  |  |
| – Enhancing the senior assistance amount | -1 545 | -1 574 | -1 605 |
| – Granting a new one-time cost of living support payment | -3 514 |  |  |
| – Limiting rate indexing to 3% | –32 | –377 | –604 |
| **Subtotal** | **-5 091** | **-1 951** | **-2 209** |
| **Improving housing affordability** | **–244** | **–106** | **–95** |
| **Strengthening security in Montréal** | **–53** | **–50** | **–50** |
| **TOTAL** | **-5 388** | **-2 107** | **-2 354** |

---

Budget 2023-2024 <br> H.12 Budget Plan

![](ex99-18_012.jpg)

&nbsp;&nbsp;&nbsp;&nbsp;⑤ Other adjustments

The $2.5-billion contingency reserve that was provided for in the March 2022 budget was not used in 2022-2023. It will be maintained at $1.5 billion in 2023-2024 and will also be adjusted downward by $500 million in 2024-2025.

The Ministère des Finances does not expect a recession in Québec, but several risks, both upside and downside, could impact the economic outlook in the coming months.<sup>4</sup>

If the economic situation were to deteriorate, for example, due to a worsening of geopolitical tensions or persistent inflation, the financial framework includes a contingency reserve of $6.5 billion over the period covered by the financial framework. This could offset the effects of a sharper-than-expected economic slowdown.

— The contingency reserve is adjusted over the period covered by the financial framework to take into account short-term economic risks and uncertainty that could affect longer-term forecasts.

Lastly, the balance of the stabilization reserve reduces the budgetary deficit by $449 million in 2022-2023. The stabilization reserve will be fully utilized in 2022-2023, resulting in a zero balance of the reserve as at March 31, 2023.

<sup>4</sup> Section J, "Alternative Forecast Scenarios," presents scenarios that make is possible to assess the impacts of more moderate-than-expected or stronger-than-expected economic growth on the financial framework.

Québec's Financial <br> Situation H.13

**Adjustments since December 2022**

Since the December 2022 *Update on Québec's Economic and Financial Situation*, the financial framework has presented adjustments, which are explained by:

the overall improvement in the economic and budgetary situation and the reduction in deposits in the Generations Fund, which lead to adjustments of $268 million in 2022-2023, $2.1 billion in 2023-2024, and $3.6 billion in 2024-2025;

the cost of the new initiatives announced, representing $1.1 billion in 2022-2023, $4.3 billion in 2023-2024, and $4.9 billion in 2024-2025;

the decrease in the contingency reserve of $1 billion in 2022-2023, $500 million in 2023-2024, and $1 billion in 2024-2025.

**Adjustments to the financial framework since December 2022** 

---

| | | | |
|:---|:---|:---|:---|
| (millions of dollars) |  |  |  |
|  | **2022-2023** | **2023-2024** | **2024-2025** |
| **BUDGETARY BALANCE<sup>(1)</sup> – DECEMBER 2022** | **-5 225** | **-2 267** | **-2 665** |
| **ECONOMIC AND BUDGETARY SITUATION** |  |  |  |
| Own-source revenue excluding revenue from government enterprises |  |  |  |
| – Tax revenue | 480 | 503 | 592 |
| – Other revenue | 534 | 496 | 354 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Subtotal | 1 014 | 999 | 947 |
| Revenue from government enterprises | 36 | 246 | –159 |
| Subtotal – Own-source revenue | 1 050 | 1 245 | 788 |
| Federal transfers | –382 | 455 | –460 |
| **Subtotal – Revenue** | **668** | **1 700** | **328** |
| Portfolio expenditures | –772 | -1 106 | 900 |
| Debt service | 470 | –77 | 161 |
| **Subtotal – Expenditure** | **–302** | **-1 183** | **1 061** |
| Deposits of dedicated revenues in the Generations Fund | –98 | 1 574 | 2 177 |
| **TOTAL ADJUSTMENTS TO THE ECONOMIC AND BUDGETARY SITUATION** | **268** | **2 092** | **3 566** |
| **BUDGET 2023-2024 INITIATIVES** |  |  |  |
| Growing Québec's wealth | –502 | -2 081 | -2 311 |
| Developing the potential of youth | –34 | –345 | –499 |
| Making the health care system more effective and more humane |  | -1 034 | -1 135 |
| Supporting Quebecers | –514 | –740 | –773 |
| Diversifying and consolidating environmental measures | –15 | –122 | –166 |
| **TOTAL INITIATIVES** | **-1 064** | **-4 323** | **-4 885** |
| Contingency reserve | 1 000 | 500 | 1 000 |
| **BUDGETARY BALANCE<sup>(1)</sup> – MARCH 2023** | **-5 021** | **-3 998** | **-2 984** |

---

Note: Totals may not add due to rounding.

(1) Budgetary balance within the meaning of the *Balanced Budget Act*, before use of the stabilization reserve.

Budget 2023-2024 <br> H.14 Budget Plan

![](ex99-18_012.jpg)

1.2 Detailed adjustments in 2022-2023

Upward adjustments of $1.4 billion since the March 2022 budget have reduced the budgetary deficit to $5.0 billion in 2022-2023 before use of the stabilization reserve.

These adjustments are primarily attributable to:

a $6.6-billion increase in revenue, namely an increase of $6.2 billion in own-source revenue and $436 million from federal transfers;

an increase in expenditures of $7.8 billion, primarily due to:

an increase in portfolio expenditures of $6.6 billion resulting from the implementation of $6.0 billion in new initiatives, including the Anti-Inflation Shield announced in the December 2022 *Update on Québec's Economic and Financial Situation* to help Quebecers cope with the rising cost of living,

a $1.2-billion increase in debt service due to rapidly rising interest rates;

the elimination of the $2.5-billion contingency reserve.

Québec's Financial <br> Situation H.15

TABLE H. 5

**Adjustments to the 2022-2023 financial framework since March 2022**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) |
|  |  | **2022-2023** | **2022-2023** | **2022-2023** |  |
|  | **March 2022** | **Adjustments** | **Adjustments** | **Adjustments** | **March 2023** |
|  |  | **Economic <br> and budgetary<br> situation** | **Initiatives<br> and other<br> adjustments** | **Total** |  |
| Own-source revenue |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Tax revenue | 87 212 | 4 754 | –532 | 4 222 | 91 434 |
| &nbsp;&nbsp;&nbsp;Other revenue | 16 851 | 946 | –32 | 914 | 17 765 |
| &nbsp;&nbsp;&nbsp;Subtotal | 104 063 | 5 700 | –564 | 5 136 | 109 199 |
| Revenue from government enterprises | 5 628 | 1 046 |  | 1 046 | 6 674 |
| Total own-source revenue | 109 691 | 6 746 | –564 | 6 182 | 115 873 |
| Federal transfers | 28 790 | 436 |  | 436 | 29 226 |
| **Revenue** | **138 481** | **7 182** | **–564** | **6 618** | **145 099** |
| Portfolio expenditures | -130 144 | –554 | -6 018 | -6 572 | -136 716 |
| Debt service | -8 842 | -1 211 |  | -1 211 | -10 053 |
| **Expenditure** | **-138 986** | **-1 765** | **-6 018** | **-7 783** | **-146 769** |
| Contingency reserve | -2 500 |  | 2 500 | 2 500 |  |
| **SURPLUS (DEFICIT)** | **-3 005** | **5 417** | **-4 082** | **1 335** | **-1 670** |
| Deposits of dedicated revenues in the Generations Fund | -3 445 | 94 |  | 94 | -3 351 |
| **BUDGETARY BALANCE BEFORE USE OF THE STABILIZATION RESERVE** | **-6 450** | **5 511** | **-4 082** | **1 429** | **-5 021** |
| Use of the stabilization reserve |  |  | 449 | 449 | 449 |
| **BUDGETARY BALANCE<sup>(1)</sup>** | **-6 450** | **5 511** | **-3 633** | **1 878** | **-4 572** |

---

Note: Totals may not add due to rounding.

(1) Budgetary balance within the meaning of the *Balanced Budget Act*, after use of the stabilization reserve.

Budget 2023-2024 <br> H.16 Budget Plan

![](ex99-18_012.jpg)

☐ Own-source revenue excluding revenue from government enterprises

For 2022-2023, own-source revenue excluding revenue from government enterprises is adjusted upward by $5.1 billion compared to the Budget 2022-2023 forecasts and totals $109.2 billion.

Tax revenues are adjusted upward by $4.2 billion, due in part to the 3.3-percentage-point upward adjustment to nominal GDP in 2022 over the Budget 2022-2023 forecasts.

Other revenue, namely duties and permits and miscellaneous revenue, is adjusted upward by $914 million.

TABLE H.6

**Adjustments in own-source revenue excluding revenue from government enterprises**

---

| | |
|:---|:---|
| (millions of dollars) | (millions of dollars) |
|  | **2022-2023** |
| **OWN-SOURCE REVENUE<sup>(1)</sup> – MARCH 2022** | **104 063** |
| **Tax revenue** |  |
| Personal income tax | 1 523 |
| Contributions for health services | 542 |
| Corporate taxes | 2 381 |
| School property tax | –66 |
| Consumption taxes | –158 |
| **Subtotal** | **4 222** |
| **Other revenue** |  |
| Duties and permits | 810 |
| Miscellaneous revenue | 104 |
| **Subtotal** | **914** |
| **Total adjustments** | **5 136** |
| **OWN-SOURCE REVENUE<sup>(1)</sup> – MARCH 2023** | **109 199** |

---

(1) Own-source revenue excluding revenue from government enterprises.

Québec's Financial <br> Situation H.17

&nbsp;&nbsp;&nbsp;&nbsp;⑤ Tax revenue

For 2022-2023, revenue from personal income tax is adjusted upward by $1.5 billion compared to the March 2022 forecast, and contributions for health services are adjusted upward by $542 million.

These improvements can be attributed, in particular, to wages and salaries, whose growth was adjusted upward by 1.8 percentage points in 2022, from 8.1% to 9.9%.

Revenue from corporate taxes is adjusted upward by $2.4 billion in 2022-2023.

This increase can primarily be attributed to the net operating surplus of corporations, whose growth was adjusted upward in 2022 by 7.9 percentage points, from –6.4% to 1.5%.

Revenue from the school property tax is adjusted downward by $66 million in 2022-2023.

This decrease is due in part to the additional contribution from the Québec government to limit the average increase in school taxes from 2% to 3% for 2022-2023.

Consumption tax revenue, which is derived mainly from the Québec sales tax, is adjusted downward by $158 million in 2022-2023.

This adjustment is explained by lower-than-expected tax revenues since the beginning of the fiscal year, despite the upward adjustment of household consumption<sup>5</sup> by 0.5 percentage points in 2022.

&nbsp;&nbsp;&nbsp;&nbsp;⑤ Other revenue

In 2022-2023, revenue from duties and permits is adjusted upward by $810 million compared to the March 2022 forecast.

— This improvement is mainly attributable to the increase in mining revenues due to sustained market prices for metals since 2020<sup>6</sup> and more favourable than projected developments in revenue from the auction of GHG emission allowances.

Miscellaneous revenue<sup>7</sup> is adjusted upward by $104 million in 2022-2023.

— This increase stems, in particular, from the increase in revenues from fines, forfeitures and recoveries, the effect of which is partially offset by the decline in investment income of the Generations Fund.

<sup>5</sup> Household consumption excluding food expenditures and shelter.

<sup>6</sup> In 2022-2023, mining revenues are deposited in the Generations Fund.

<sup>7</sup> Miscellaneous revenue includes revenues from interest, the sale of goods and services, as well as from fines, forfeitures and recoveries, among other things.

Budget 2023-2024 <br> H.18 Budget Plan

![](ex99-18_012.jpg)

**A favourable adjustment of own-source revenue in Québec<br> and other Canadian provinces in 2022-2023**

Own-source revenue<sup>1</sup> is adjusted by $5.1 billion, or 4.9%, in 2022-2023 compared to the March 2022 budget forecast. In 2022, nominal GDP is adjusted upward by 3.3 percentage points, which results, in particular, in a strong improvement in revenue from personal income tax and corporate taxes in 2022-2023.

Like Québec, several provinces are forecasting an improvement in their own-source revenue due to more sustained economic activity than what was anticipated in spring 2022. In particular, British Columbia and Ontario adjusted their own-source revenue by 25.2% and 11.6%, respectively, due to a positive trend in personal income tax and corporate taxes. In addition, Alberta adjusted its revenue by 28.5%, mainly due to an increase in revenue from natural resources.

Despite the favourable adjustments observed in Québec, several risks may influence own-source revenue forecasts. For example:

– higher-than-expected energy prices could impact activity in certain sectors and adversely affect corporate profits, which would have a negative effect on revenue from corporate taxes;

– a further hike in interest rates could reduce households' disposable income and purchasing power, which would have a negative effect on revenue from consumption taxes.

---

| | |
|:---|:---|
| **Adjustment to own-source revenue<sup>(1)</sup> – 2022-2023** | **Adjustment to nominal GDP growth – 2022** |
| (percentage of revenue) | (percentage points) |
| <br> ![](ex99-18_001.jpg)<br>| <br> ![](ex99-18_002.jpg)<br>|

---

(1) Own-source revenue excluding revenue from government enterprises. Sources: 2023-2024 provincial budgets, financial report for the third quarter
of 2022-2023 for Ontario and New Brunswick.

Sources: 2023-2024 provincial budgets, financial report for the third quarter of 2022-2023 for Ontario and New Brunswick.

<sup>1</sup> Own-source revenue excluding revenue from government enterprises.

Québec's Financial <br> Situation H.19

☐ Revenue from government enterprises

For 2022-2023, revenue from government enterprises is adjusted upward by $1.0 billion, to $6.7 billion.

This increase is primarily due to Hydro-Québec's results, driven essentially by the increase in the value of its electricity exports.

This increase is partially offset by a decrease in Investissement Québec's anticipated results stemming from the unfavourable performance of its equity and venture capital portfolios as well as its investment funds due to the downturn in financial markets since March 2022. The decline in the financial markets has particularly affected companies in the technology sector, impacting the returns on investments held in this sector by Investissement Québec.

TABLE H.7

**Adjustments to revenue from government enterprises**

---

| | |
|:---|:---|
| (millions of dollars) | (millions of dollars) |
|  | **2022-2023** |
| **REVENUE FROM GOVERNMENT ENTERPRISES – MARCH 2022** | **5 628** |
| Hydro-Québec | 1 275 |
| Loto-Québec | 140 |
| Société des alcools du Québec | 59 |
| Investissement Québec | –451 |
| Société québécoise du cannabis<sup>(1)</sup> | 1 |
| Other<sup>(2)</sup> | 22 |
| **Total adjustments** | **1 046** |
| **REVENUE FROM GOVERNMENT ENTERPRISES – MARCH 2023** | **6 674** |

---

(1) Revenue is allocated to the Fund to Combat Addiction.

(2) The other government enterprises are the Société ferroviaire et portuaire de Pointe-Noire, Capital Financière agricole and the Société du parc industriel et portuaire de Bécancour.

Budget 2023-2024 <br> H.20 Budget Plan

![](ex99-18_012.jpg)

☐ Federal transfers

In 2022-2023, revenues from federal transfers stand at $29.2 billion, an upward adjustment of $436 million compared to Budget 2022-2023.

This upward adjustment is due, in particular, to a one-time payment of $450 million to eliminate the backlog of surgeries, announced by the federal government in March 2022.

TABLE H.8

**Adjustments to federal transfer revenues**

---

| | |
|:---|:---|
| (millions of dollars) | (millions of dollars) |
|  | **2022-2023** |
| **FEDERAL TRANSFERS – MARCH 2022** | **28 790** |
| Equalization |  |
| Health transfers | 46 |
| Transfers for post-secondary education and other social programs<sup>(1)</sup> | –237 |
| Other programs | 627 |
| **Total adjustments** | **436** |
| **FEDERAL TRANSFERS – MARCH 2023** | **29 226** |

---

(1) The downward adjustment to transfers for post-secondary education and other social programs is due to the value of the special Québec abatement, which has been adjusted upward. The special Québec abatement (16.5% of federal personal income tax collected in Québec) is deducted from federal transfer revenues.

Québec's Financial <br> Situation H.21

☐ Portfolio expenditures

For 2022-2023, portfolio expenditures amount to $136.7 billion, which represents an upward adjustment of $6.6 billion compared to the March 2022 forecasts.

The adjustment is primarily due to $6.0 billion in new initiatives announced since the 2022-2023 budget, including:

$3.5 billion to grant Quebecers a new one-time cost of living support payment;

$1.5 billion to enhance the senior assistance amount to $2 000;

$496 million in housing initiatives;

$200 million to support the recovery of public transit.

Other adjustments total $554 million and are explained, in particular, by the net effect of increased spending to overcome the public health crisis and downward adjustments to the spending of certain bodies.

TABLE H.9

**Adjustments to portfolio expenditures**

---

| | |
|:---|:---|
| (millions of dollars) | (millions of dollars) |
|  | **2022-2023** |
| **PORTFOLIO EXPENDITURES – MARCH 2022** | **130 144** |
| **New initiatives since March 2022** |  |
| Granting a new one-time cost of living support payment | 3 514 |
| Enhancing the senior assistance amount | 1 545 |
| Housing initiatives<sup>(1)</sup> | 496 |
| Supporting the recovery of public transit | 200 |
| Renewing the envelope for the short-term training program | 100 |
| Other new initiatives | 164 |
| **Subtotal – New initiatives since March 2022** | **6 018** |
| **Other adjustments** | **554** |
| **Total adjustments** | **6 572** |
| **PORTFOLIO EXPENDITURES – MARCH 2023** | **136 716** |

---

Note: Totals may not add due to rounding.

(1) In particular, this amount includes the initiatives to improve housing affordability announced in December 2022 and to accelerate the start of AccèsLogis projects.

Budget 2023-2024 <br> H.22 Budget Plan

![](ex99-18_012.jpg)

**Financial situation of the Land Transportation Network Fund**

The Land Transportation Network Fund (LTNF) was established in 2010 to fund road and public transit infrastructure.

The LTNF is funded by the fuel tax and driver's licence and registration fees, in particular. The allocation of this revenue to the LTNF creates a direct link between users of the road infrastructure and its funding.

Other amounts, such as amounts from Canada-Québec infrastructure agreements or the Electrification and Climate Change Fund are also added to the LTNF, in order to develop public transit.

– In addition, budgetary appropriations are allocated to the LTNF to support funding for various financial assistance programs, including passenger transportation and local roads.

In recent years, significant investments have been made to maintain and develop land transportation networks, and these investments will remain high. Major projects are being planned or carried out, such as the extension of route 138, the refurbishment of the Louis-Hippolyte-La Fontaine Tunnel, the reconstruction of the Île-d'Orléans bridge, the extension of the Montréal metro blue line and Québec City's strategic public transit system. Since the pandemic, the government has also made significant investments to maintain transportation services.

When also considering the fact that fuel tax revenue is no longer expected to rise due to the growing popularity of electric vehicles, the result is a situation where the expenses borne by the LTNF are growing faster than the revenue deposited in the fund. As a result, it is expected that the LTNF will have an accumulated deficit starting in 2026-2027.

Solutions will need to be identified in collaboration with all stakeholders.

**Multi-year financial framework of the LTNF**

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) |
|  | **2022-2023** | **2023-2024** | **2024-2025** | **2025-2026** | **2026-2027** | **2027-2028** | **AAGR<sup>(1)</sup><br> (in %)** |
| Revenue | 6 681 | 5 481 | 5 973 | 6 330 | 6 702 | 7 140 | 1.3 |
| Expenditure | -6 663 | -5 657 | -6 239 | -7 185 | -7 697 | -8 855 | 5.9 |
| Surplus (deficit) | 18 | –176 | –267 | –855 | –995 | -1 715 |  |
| **Accumulated surplus (deficit)** | **1 323** | **1 147** | **880** | **25** | **–970** | **-2 685** |  |

---

Note: Totals may not add due to rounding.

(1) Average annual growth rate, corresponding to the geometric mean over five years, from 2023-2024 to 2027-2028.

Québec's Financial <br> Situation H.23

☐ Debt service

For 2022-2023, the debt service is adjusted upward by $1.2 billion, to $10.1 billion, due to increased interest rates.

— The rapid increase in interest rates in 2022-2023 results, in particular, in losses on the disposal of assets in the management of the investment activities of the Sinking Fund for Government Borrowing.

TABLE H.10

**Adjustment to debt service**

---

| | |
|:---|:---|
| (millions of dollars) | (millions of dollars) |
|  | **2022-2023** |
| **DEBT SERVICE – MARCH 2022** | **8 842** |
| Interest on direct debt<sup>(1)</sup> | 1 136 |
| Interest on the liability for the retirement plans and other employee future benefits<sup>(2)</sup> | 75 |
| **Total adjustments** | **1 211** |
| **DEBT SERVICE – MARCH 2023** | **10 053** |

---

(1) Interest on direct debt includes the income of the Sinking Fund for Government Borrowing. This income, which is applied against debt service, consists of interest generated on investments as well as gains and losses on disposal. The forecast for this income may be adjusted upward or downward since it is closely tied to the change in interest rates and market behaviour.

(2) This corresponds to the interest on obligations relating to the retirement plans and other future benefits of public and parapublic sector employees, minus mainly the investment income of the Retirement Plans Sinking Fund (RPSF).

Budget 2023-2024 <br> H.24 Budget Plan

![](ex99-18_012.jpg)

2. Returning to a balanced budget

In early 2020, the pandemic caused a shock of unprecedented magnitude, sending the economy into a short but deep recession. Global economic activity quickly began to recover in a synchronized fashion, but this generated inflationary pressures that caused quick and substantial interest rate hikes.

Despite this economic volatility, the government has maintained adequate funding for the government's main missions, thus generating deficits. With the transition to a more stable economic environment, Budget 2023-2024 is an opportunity for the government to table its plan for a return to a balanced budget.

According to this plan, the deficit will be limited to $4 billion in 2023-2024, then will be progressively reduced by $1 billion per year until fiscal balance is achieved in 2027-2028.

The return to a balanced budget will be achieved while:

— reducing personal income tax;

— fostering economic growth;

— adequately funding the government's missions;

— ensuring that expenditure growth is in line with revenue growth.

Sound management of public finances enables the government to eliminate the $2.8-billion deficit that was ultimately forecast in Budget 2022-2023 and to continue reducing the debt burden.

---

| |
|:---|
| CHART H. 1<br>**Change in the budgetary balance** |
| (billions of dollars) |
| &nbsp;&nbsp;![](ex99-18_003.jpg)<br>|

---

Québec's Financial <br> Situation H.25

☐ Reducing personal income tax

The return to a balanced budget can be achieved while reducing personal income tax. In Budget 2023-2024, the government is planning to reduce the two bottom tax rates, thereby increasing Quebecers' disposable income and stimulating the labour supply.

— This tax cut will be funded by more moderate growth in deposits in the Generations Fund and will not reduce the government's financial capacity to support its various missions.

— The decrease in deposits of dedicated revenues in the Generations Fund as of 2023-2024 is consistent with the new debt reduction objective announced in this budget.<sup>8</sup>

☐ Fostering economic growth

Since fall 2018, the government has taken substantial steps with regard to creating wealth and increasing Québec's economic potential, mainly to enhance business productivity and promote workers' integration and retention in the labour market.

In Budget 2023-2024, the government is continuing to take action with new measures aimed at:

— increasing the productivity of Québec's economy;

— contributing to the prosperity of the regions;

— addressing the labour shortage.

☐ Adequately funding the government's missions

The return to a balanced budget will not be achieved at the expense of the government's ability to adequately fund its various missions. The financial framework of Budget 2023-2024 guarantees stable and predictable funding for the government's missions while ensuring that the cost of renewing the various portfolios is covered and enhancing services. In particular, it includes:

additional investments of $2.3 billion to develop the potential of youth;

additional investments of $5.6 billion to make the health care system more effective and more humane;

an increase in investment in the Québec Infrastructure Plan (QIP) to $150 billion.<br>

<sup>8</sup> See Section I, "The Québec Government's Debt" in the *Québec Budget Plan* – *March 2023*, and Section C, "Report on the Application of the Legislation Respecting a Balanced Budget, Debt Reduction and the Generations Fund" in *Additional Information – March 2023*.

Budget 2023-2024 <br> H.26 Budget Plan

![](ex99-18_012.jpg)

☐ Ensuring that expenditure growth is in line with revenue growth

The needs that arose from the pandemic have resulted in expenditure growth exceeding revenue growth. During the period covered by the financial framework, expenditure growth will gradually align with revenue growth.

Up until 2027-2028, annual growth in revenue will reach 2.9% on average. Excluding the impact of the COVID-19 support and recovery measures, annual growth in expenditure will also be 2.9% on average.

**Weight of revenue and expenditure in the economy**

The economic shock caused by the pandemic, coupled with the government's action to support Quebecers during this unprecedented crisis, has mainly had the effect of considerably increasing the weight of public finances in the economy.

The economic recovery and the plan to return to a balanced budget will reduce the weight to a level similar to what it was previously. In detail:

after peaking at 28.1% of GDP in 2020-2021, the weight of expenditure will decrease gradually to stand at 25.0% in 2027-2028;

&nbsp;&nbsp;&nbsp;&nbsp;▪ The weight of portfolio expenditures will gradually decrease from 26.4% in 2020-2021
to 23.3% eventually.

the weight of revenue will stand at 25.7% in 2027-2028, mainly due to the tax reduction announced in the March 2023 budget;

– the gap between the weight of revenue and the weight of expenditure is due to the deposits in the Generations Fund, which reflect the debt reduction efforts.

---

| |
|:---|
| **Weight of revenue and expenditure in the economy – 2018-2019 to 2027-2028** |
| (percentage of nominal GDP) |
| &nbsp;&nbsp;<br> ![](ex99-18_004.jpg)<br>|

---

Québec's Financial <br> Situation H.27

**Lifting of suspension and modernization<br> of the *Balanced Budget Act***

**Lifting the suspension of certain effects of the Act**

The *Balanced Budget Act* was amended by Bill 17,<sup>1</sup> assented to on February 24, 2022, which temporarily suspends certain effects of the Act from 2021-2022 until the end of the fiscal year determined by the Minister, that is, no later than the fiscal 2023-2024 Budget Speech.

The desired effects of the suspension include:

– the prohibition of an actual or forecast budgetary deficit;

– the tabling of a plan to restore fiscal balance;

– the obligation to implement offsetting measures for overruns.

In order to meet the Act's requirements, the Minister of Finance is lifting the suspension of these effects as of the end of fiscal 2022-2023.

As a result, the financial framework of Budget 2023-2024 includes a plan to restore a balanced budget by 2027-2028. The plan presented, whereby the deficit will be limited to $4 billion in 2023-2024, and thereafter progressively reduced by $1 billion per year until fiscal balance is achieved, constitutes the government's plan for restoring fiscal balance.

As such, the fiscal framework calls for a $1-billion decrease in the deficit in 2023-2024 compared with 2022-2023. Considering the changing revenue outlook, the expenditure level has therefore been determined so as to reduce the deficit in accordance with the requirements of the Act.

**Modernization of the *Balanced Budget Act***

Since its enactment in 1996, the *Balanced Budget Act* has been amended on several occasions, essentially to suspend some of its effects during periods of recession or economic instability.

Since experience has revealed the difficulties of enforcing the Act in a context of major economic slowdown, Budget 2023-2024 provides an opportunity to modernize certain of its provisions.

The government wishes specifically to:

– improve fiscal flexibility in determining the fiscal balance;

– update the rules requiring the tabling of a plan to offset budget overruns, including the threshold and timeframe for when such a plan is required;

– revise the rules governing the execution of this plan, including the implementation of measures to offset overruns and the time period for offsetting overruns;

– abolish the stabilization reserve.

Proposed details will be specified at a later date.

1 *An Act respecting the implementation of certain provisions of the Budget Speech of 25 March 2021 and amending other provisions* (S.Q. 2022, c. 3).

Budget 2023-2024 <br> H.28 Budget Plan

![](ex99-18_012.jpg)

3. Revenue and expenditure forecasts

Budget 2023-2024 presents the detailed change in revenue and expenditure, that is, the three-year outlook from 2022-2023 to 2024-2025.

TABLE H.11

**Change in revenue and expenditure**

---

| | | | | |
|:---|:---|:---|:---|:---|
| (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) |
|  | **2022-2023** | **2023-2024** | **2024-2025** | **AAGR<sup>(1)</sup>** |
| **Revenue** |  |  |  |  |
| Own-source revenue excluding revenue from government enterprises | 109 199 | 111 182 | 115 370 |  |
| &nbsp;&nbsp;&nbsp;*% change* | *5.3* | *1.8* | *3.8* | *3.6* |
| Revenue from government enterprises | 6 674 | 6 807 | 6 685 |  |
| &nbsp;&nbsp;&nbsp;*% change* | *12.0* | *2.0* | *–1.8* | *3.9* |
| Federal transfers | 29 226 | 29 742 | 29 741 |  |
| &nbsp;&nbsp;&nbsp;*% change* | *0.1* | *1.8* | *0.0* | *0.6* |
| **Total revenue** | **145 099** | **147 731** | **151 796** |  |
| &nbsp;&nbsp;&nbsp;*% change<sup>(2)</sup>* | ***4.5*** | ***1.8*** | ***2.8*** | ***3.0*** |
| **Expenditure** |  |  |  |  |
| Portfolio expenditures | -136 716 | -138 392 | -141 468 |  |
| &nbsp;&nbsp;&nbsp;*% change* | *7.4* | *1.2* | *2.2* | *3.6* |
| Debt service | -10 053 | -9 464 | -9 925 |  |
| &nbsp;&nbsp;&nbsp;*% change* | *16.4* | *–5.9* | *4.9* | *4.7* |
| **Total expenditure** | **-146 769** | **-147 856** | **-151 393** |  |
| &nbsp;&nbsp;&nbsp;*% change<sup>(3)</sup>* | ***7.9*** | ***0.7*** | ***2.4*** | ***3.6*** |
| Contingency reserve |  | -1 500 | -1 000 |  |
| **SURPLUS (DEFICIT)** | **-1 670** | **-1 625** | **–597** |  |
| Deposits of dedicated revenues in the Generations Fund | -3 351 | -2 373 | -2 387 |  |
| **BUDGETARY BALANCE BEFORE USE**<br> **OF THE STABILIZATION RESERVE**<br>| **-5 021** | **-3 998** | **-2 984** |  |
| Use of the stabilization reserve | 449 |  |  |  |
| **BUDGETARY BALANCE<sup>(4)</sup>** | **-4 572** | **-3 998** | **-2 984** |  |

---

(1) Average annual growth rate, corresponding to the geometric mean over three years, from 2022-2023 to 2024-2025.

(2) Detailed explanations for revenue growth are presented in subsection 3.1.

(3) Detailed explanations for expenditure growth are presented in subsection 3.2.

(4) Budgetary balance within the meaning of the *Balanced Budget Act*, after use of the stabilization reserve.

Québec's Financial <br> Situation H.29

3.1 Change in revenue

Government revenue encompasses own-source revenue, including revenue from government enterprises, as well as revenue from federal transfers.

Government revenue stands at $145.1 billion in 2022-2023, or $115.9 billion in own-source revenue and $29.2 billion from federal transfers.

Government revenue will stand at $147.7 billion in 2023-2024 and $151.8 billion in 2024-2025, growing by 1.8% and 2.8%, respectively.

TABLE H.12

**Change in revenue**

---

| | | | | |
|:---|:---|:---|:---|:---|
| (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) |
|  | **2022-2023** | **2023-2024** | **2024-2025** | **AAGR<sup>(1)</sup>** |
| **Own-source revenue** |  |  |  |  |
| Own-source revenue excluding revenue from government enterprises | 109 199 | 111 182 | 115 370 |  |
| &nbsp;&nbsp;&nbsp;*% change<sup>(2)</sup>* | *5.3* | *1.8* | *3.8* | *3.6* |
| Revenue from government enterprises | 6 674 | 6 807 | 6 685 |  |
| &nbsp;&nbsp;&nbsp;*% change<sup>(3)</sup>* | *12.0* | *2.0* | *–1.8* | *3.9* |
| **Subtotal** | **115 873** | **117 989** | **122 055** |  |
| &nbsp;&nbsp;&nbsp;***% change*** | ***5.7*** | ***1.8*** | ***3.4*** | ***3.6*** |
| Federal transfers | 29 226 | 29 742 | 29 741 |  |
| &nbsp;&nbsp;&nbsp;*% change<sup>(4)</sup>* | *0.1* | *1.8* | *0.0* | *0.6* |
| **TOTAL** | **145 099** | **147 731** | **151 796** |  |
| &nbsp;&nbsp;&nbsp;***% change*** | ***4.5*** | ***1.8*** | ***2.8*** | ***3.0*** |

---

(1) Average annual growth rate, corresponding to the geometric mean over three years, from 2022-2023 to 2024-2025.

(2) The change in own-source revenue excluding revenue from government enterprises reflects the slowdown in economic activity in 2023 and the 1-percentage-point decrease in the two bottom tax rates announced in Budget 2023-2024 and beginning in the 2023 taxation year.

(3) The variation in growth rates is mainly due to Hydro-Québec's exceptional results in 2022-2023 with respect to export prices.

(4) The change in federal transfers reflects, in particular, the additional amounts for health care announced by the federal government on February 7, 2023, a portion of which will be non-recurring as of 2024-2025.

Budget 2023-2024 <br> H.30 Budget Plan

![](ex99-18_012.jpg)

3.1.1 Own-source revenue excluding revenue from government enterprises

Own-source revenue excluding revenue from government enterprises consists mainly of tax revenue, including personal income tax, contributions for health services, corporate taxes, school property tax and consumption taxes.

— Changes in own-source revenue generally reflect changes in economic activity in Québec and in the tax system.

Own-source revenue also includes other sources of revenue:

— duties and permits, in particular revenue from the carbon market;

— miscellaneous revenue, such as tuition fees and revenues from interest, the sale of goods and services, and fines, forfeitures and recoveries.

In 2022-2023, own-source revenue stands at $109.2 billion, an increase of 5.3% compared to 2021-2022. It will reach $111.2 billion in 2023-2024 and $115.4 billion in 2024-2025, growing by 1.8% and 3.8%, respectively.

TABLE H.13

**Change in own-source revenue excluding revenue from government enterprises – Summary**

---

| | | | | |
|:---|:---|:---|:---|:---|
| (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) |
|  | **2022-2023** | **2023-2024** | **2024-2025** | **AAGR<sup>(1)</sup>** |
| Tax revenue | 91 434 | 92 736 | 96 512 |  |
| &nbsp;&nbsp;&nbsp;*% change* | *5.2* | *1.4* | *4.1* | *3.5* |
| Other revenue | 17 765 | 18 446 | 18 858 |  |
| &nbsp;&nbsp;&nbsp;*% change* | *6.0* | *3.8* | *2.2* | *4.0* |
| **TOTAL** | **109 199** | **111 182** | **115 370** |  |
| &nbsp;&nbsp;&nbsp;***% change*** | ***5.3*** | ***1.8*** | ***3.8*** | ***3.6*** |

---

(1) Average annual growth rate, corresponding to the geometric mean over three years, from 2022-2023 to 2024-2025.

Québec's Financial <br> Situation H.31

☐ Tax revenue

In 2022-2023, revenue from personal income tax, the government's largest revenue source, stands at $42.7 billion, up 4.3% compared to 2021-2022. It will reach $43.1 billion in 2023-2024 and $44.7 billion in 2024-2025, representing a change of 1.1% and 3.8%, respectively.

Among other things, this change in revenue from personal income tax reflects:

the increase in household income, including wages and salaries, which will grow by 9.9% in 2022, 3.7% in 2023 and 3.4% in 2024, due to the strong labour market;

— all the parameters of the personal income tax system, such as indexation and the progressive nature of the tax system;

the 1-percentage-point decrease in the two bottom tax rates announced in Budget 2023-2024 and beginning in the 2023 taxation year.

Contributions for health services stand at $7.8 billion in 2022-2023, representing an increase of 5.9%. They will reach $7.9 billion in 2023-2024 and $8.2 billion in 2024-2025, representing growth of 1.3% and 2.7%, respectively.

— This favourable change is due to the expected growth in wages and salaries.

— It also takes into account the impact of the new tax holiday for large investment projects announced in Budget 2023-2024.

Corporate tax revenue will reach $13.3 billion in 2022-2023, up 2.6% from 2021-2022. It will stand at $13.2 billion in 2023-2024 and $14.1 billion in 2024-2025, a change of -0.5% and 6.8%, respectively.

These figures reflect the expected change in the net operating surplus of corporations, which stands at 1.5% in 2022, -4.9% in 2023 and 5.3% in 2024.

— It also takes into account the impact of the new tax holiday for large investment projects announced in Budget 2023-2024.

Revenue from the school property tax stands at $1.1 billion in 2022-2023, up 3.3% compared to 2021-2022. It will reach $1.2 billion in 2023-2024 and $1.3 billion in 2024-2025, growing by 6.5% and 9.1%, respectively.

— The growth in revenue from the school property tax is influenced by the increase in the number of students, and the expected increase in the cost of services funded by the school property tax.

It also reflects the additional contribution of $173.4 million per year from the Québec government to limit the increase in school taxes from 2% to 3% on average for 2022-2023.

Budget 2023-2024 <br> H.32 Budget Plan

![](ex99-18_012.jpg)

TABLE H.14

**Change in own-source revenue excluding revenue from government enterprises**

---

| | | | | |
|:---|:---|:---|:---|:---|
| (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) |
|  | **2022-2023** | **2023-2024** | **2024-2025** | **AAGR<sup>(1)</sup>** |
| **Tax revenue** |  |  |  |  |
| Personal income tax<sup>(2)</sup> | 42 670 | 43 126 | 44 749 |  |
| &nbsp;&nbsp;&nbsp;*% change* | *4.3* | *1.1* | *3.8* | *3.0* |
| Contributions for health services | 7 841 | 7 944 | 8 161 |  |
| &nbsp;&nbsp;&nbsp;*% change* | *5.9* | *1.3* | *2.7* | *3.3* |
| Corporate taxes<sup>(3)</sup> | 13 263 | 13 192 | 14 090 |  |
| &nbsp;&nbsp;&nbsp;*% change* | *2.6* | *–0.5* | *6.8* | *2.9* |
| School property tax | 1 112 | 1 184 | 1 292 |  |
| &nbsp;&nbsp;&nbsp;*% change* | *3.3* | *6.5* | *9.1* | *6.3* |
| Consumption taxes<sup>(4)</sup> | 26 548 | 27 290 | 28 220 |  |
| &nbsp;&nbsp;&nbsp;*% change* | *7.9* | *2.8* | *3.4* | *4.7* |
| **Subtotal** | **91 434** | **92 736** | **96 512** |  |
| &nbsp;&nbsp;&nbsp;***% change*** | ***5.2*** | ***1.4*** | ***4.1*** | ***3.5*** |
| **Other revenue** |  |  |  |  |
| Duties and permits<sup>(5)</sup> | 5 981 | 5 739 | 5 746 |  |
| &nbsp;&nbsp;&nbsp;*% change* | *–1.3* | *–4.0* | *0.1* | *–1.7* |
| Miscellaneous revenue | 11 784 | 12 707 | 13 112 |  |
| &nbsp;&nbsp;&nbsp;*% change*<sup>(6),(7)</sup> | *10.1* | *7.8* | *3.2* | *7.0* |
| **Subtotal** | **17 765** | **18 446** | **18 858** |  |
| &nbsp;&nbsp;&nbsp;***% change*** | ***6.0*** | ***3.8*** | ***2.2*** | ***4.0*** |
| **TOTAL** | **109 199** | **111 182** | **115 370** |  |
| &nbsp;&nbsp;&nbsp;***% change*** | ***5.3*** | ***1.8*** | ***3.8*** | ***3.6*** |

---

(1) Average annual growth rate, corresponding to the geometric mean over three years, from 2022-2023 to 2024-2025.

(2) The change in revenue from personal income tax in 2023-2024 is due to the 3.7% increase in wages and salaries in 2023 and the 1-percentage-point decrease in the two bottom tax rates announced in Budget 2023-2024 and beginning in the 2023 taxation year.

(3) The change in corporate tax revenue from 2022-2023 to 2024-2025 is due in part to the change in the net operating surplus of corporations of 1.5% in 2022, -4.9% in 2023 and 5.3% in 2024.

(4) The 7.9% increase in consumption taxes in 2022-2023 is due in part to the 12.5% increase in household consumption and the -0.1% change in residential construction investment in 2022.

(5) The decrease in revenue from duties and permits in 2022-2023 and 2023-2024 is mainly due to lower mining revenues over this period, as a result of the expected decrease in metal prices, mainly iron ore.

(6) The 10.1% growth in miscellaneous revenue in 2022-2023 is due, on the one hand, to an increase in revenues from interest, fines, forfeitures and recoveries, and, on the other hand, to an increase in revenues from non-budget-funded bodies, special funds and bodies in the health and social services, education and higher education networks.

(7) The 7.8% growth in miscellaneous revenue in 2023-2024 is due to the increase in the investment income of the Generations Fund, which was below its usual level in 2022-2023.

Québec's Financial <br> Situation H.33

Consumption tax revenue totals $26.5 billion in 2022-2023, up 7.9% compared to 2021-2022. It will stand at $27.3 billion in 2023-2024 and $28.2 billion in 2024-2025, an increase of 2.8% and 3.4%, respectively.

The change in consumption tax revenue mainly reflects:

the expected growth in household consumption<sup>9</sup> of 12.5% in 2022, 4.0% in 2023 and 3.4% in 2024;

the expected change in residential construction investment of -0.1% in 2022, -7.1% in 2023 and 2.0% in 2024;

the increase in the specific tax on tobacco products of $8 per carton of 200 cigarettes, which was announced on February 8, 2023.

☐ Other revenue

Revenue from duties and permits amounts to $6.0 billion in 2022-2023, a decrease of 1.3% compared to 2021-2022. It will stand at $5.7 billion in 2023-2024 and 2024-2025, a change of -4.0% and 0.1%, respectively.

— The decrease in revenue from duties and permits in 2022-2023 and 2023-2024 is mainly due to lower mining revenues resulting from the expected decline in metal prices.

The change in revenue from duties and permits takes into account the effect of capping the indexation of government rates at 3% for the next four years.

Miscellaneous revenue stands at $11.8 billion in 2022-2023, an increase of 10.1% compared to 2021-2022. It will reach $12.7 billion in 2023-2024 and $13.1 billion in 2024-2025, representing increases of 7.8% and 3.2%, respectively.

— The positive trend in miscellaneous revenue is due to the anticipated revenue of special funds, non-budget-funded bodies and bodies in the health and social services, education and higher education networks.

— For example, the growth in the revenue of the higher education network is influenced by, among other things, tuition fee revenues, the change in clienteles and user revenues.

The change in miscellaneous revenue also takes into account the effect of capping the indexation of government rates at 3% for the next four years.

<sup>9</sup> Household consumption excluding food expenditures and shelter.

Budget 2023-2024 <br> H.34 Budget Plan

![](ex99-18_012.jpg)

3.1.2 Revenue from government enterprises

Government enterprises consist of public corporations that play a commercial role, have managerial autonomy and are financially self-sufficient. Revenue from government enterprises corresponds in large part to the net earnings of these enterprises.

This revenue amounts to $6.7 billion in 2022-2023, an increase of 12.0%, $6.8 billion in 2023-2024, an increase of 2.0%, and $6.7 billion in 2024-2025, a decrease of 1.8%.

TABLE H.15

**Change in revenue from government enterprises**

---

| | | | | |
|:---|:---|:---|:---|:---|
| (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) |
|  | **2022-2023** | **2023-2024** | **2024-2025** | **AAGR<sup>(1)</sup>** |
| Hydro-Québec<sup>(2)</sup> | 3 800 | 3 525 | 3 325 |  |
| Loto-Québec | 1 523 | 1 498 | 1 511 |  |
| Société des alcools du Québec | 1 419 | 1 459 | 1 469 |  |
| Investissement Québec | –195 | 216 | 274 |  |
| Société québécoise du cannabis<sup>(3)</sup> | 95 | 92 | 94 |  |
| Other<sup>(4)</sup> | 32 | 17 | 12 |  |
| **TOTAL** | **6 674** | **6 807** | **6 685** |  |
| &nbsp;&nbsp;&nbsp;***% change*** | ***12.0*** | ***2.0*** | ***–1.8*** | ***3.9*** |

---

(1) Average annual growth rate, corresponding to the geometric mean over three years, from 2022-2023 to 2024-2025.

(2) The forecast revenue includes the impact of Hydro-Québec's domestic rate cap starting in 2023-2024. The downward trend in Hydro-Québec's revenue over the period is due to the exceptional results in 2022-2023 with respect to export prices.

(3) Revenue is allocated to the Fund to Combat Addiction.

(4) The other government enterprises are the Société ferroviaire et portuaire de Pointe-Noire, Capital Financière agricole and the Société du parc industriel et portuaire de Bécancour.

The 12.0% growth in 2022-2023 is mainly due to the increase in the anticipated results of Hydro-Québec—stemming primarily from the increase in the value of its electricity exports—and of Loto-Québec, due to its gradual return to operating at maximum capacity.

This growth is partially offset by a decrease in Investissement Québec's anticipated results, which is due to the unfavourable performance of its equity and venture capital portfolios, as well as its investment funds, due to the expected downturn in financial markets in 2022-2023. The decline in the financial markets has particularly affected companies in the technology sector, impacting the returns on investments held in this sector by Investissement Québec.

Québec's Financial <br> Situation H.35

The 2.0% growth in 2023-2024 stems principally from the return to normal of Investissement Québec's anticipated results.

— This increase is partly offset by a decline in the expected results of Hydro-Québec, stemming from the expected decrease in the value of its electricity exports.

The decrease of 1.8% in 2024-2025 is mainly due to the decline in the expected results of Hydro-Québec stemming from the decrease in the value of its electricity exports that will continue for a second year.

Budget 2023-2024 <br> H.36 Budget Plan

![](ex99-18_012.jpg)

3.1.3 Federal transfers

Revenues from federal transfers consist of federal government revenues paid to Québec under the *Federal-Provincial Fiscal Arrangements Act*, in addition to revenues from other programs under bilateral agreements.

They include mainly equalization and revenue from the Canada Health Transfer (CHT) and from the Canada Social Transfer (CST).

On February 7, 2023, the federal government announced additional amounts for health care funding. Québec's share is estimated at $4.7 billion over five years, from 2023-2024 to 2027-2028. These amounts are built into the financial framework.

Overall, revenues from federal transfers are expected to increase by 1.8% in 2023-2024 due to the increase in health transfers. In 2023-2024, the CHT, which is linked to Canada's nominal GDP, will increase by 9.3% for Canada as a whole, and Québec will receive its share ($447 million) of a one-time increase in the CHT of $2.0 billion.

Revenues from federal transfers will remain stable in 2024-2025. One of the reasons for this is the non-recurrence of the increase in the CHT of $2.0 billion announced by the federal government for 2023-2024.

TABLE H.16

**Change in federal transfers**

---

| | | | | |
|:---|:---|:---|:---|:---|
| (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) |
|  | **2022-2023** | **2023-2024** | **2024-2025** | **AAGR<sup>(1)</sup>** |
| Equalization | 13 666 | 14 037 | 14 021 |  |
| &nbsp;&nbsp;&nbsp;*% change* | *4.2* | *2.7* | *–0.1* | *2.2* |
| Health transfers | 7 124 | 8 660 | 8 615 |  |
| &nbsp;&nbsp;&nbsp;*% change<sup>(2)</sup>* | *–13.2* | *21.6* | *–0.5* | *1.6* |
| Transfers for post-secondary education and other social programs | 1 294 | 1 366 | 1 382 |  |
| &nbsp;&nbsp;&nbsp;*% change* | *–15.4* | *5.6* | *1.2* | *–3.3* |
| Other programs | 7 142 | 5 679 | 5 723 |  |
| &nbsp;&nbsp;&nbsp;*% change<sup>(3)</sup>* | *12.8* | *–20.5* | *0.8* | *–3.3* |
| **TOTAL** | **29 226** | **29 742** | **29 741** |  |
| &nbsp;&nbsp;&nbsp;***% change*** | ***0.1*** | ***1.8*** | ***0.0*** | ***0.6*** |

---

(1) Average annual growth rate, corresponding to the geometric mean over three years, from 2022-2023 to 2024-2025.

(2) Health transfers are down 13.2% in 2022-2023 due to a one-time payment in the previous year to support the health system and vaccination in the context of the pandemic.

(3) Revenues from other programs are expected to decrease in 2023-2024 due to the non-recurrence of certain types of assistance as well as the pace of completion of federally funded infrastructure projects.

Québec's Financial <br> Situation H.37

**Additional federal funding for health care**

On February 7, 2023, the federal government announced additional amounts for health care for the provinces of $46.1 billion over 10 years, from 2023-2024 to 2032-2033.

The federal government has committed to:

making a one-time increase to the Canada Health Transfer (CHT) of $2 billion in 2023-2024;

ensuring minimum growth of 5% in the CHT until 2027-2028 (as of 2028-2029, the 3% floor will begin to apply again);

granting the provinces $25 billion over 10 years under bilateral agreements.

Québec's share of these additional amounts between now and 2027-2028 is estimated at $4.1 billion.

During the announcement, the federal government also reiterated its desire to grant the provinces $3 billion over five years, from 2023-2024 to 2027-2028, for long-term care, representing an amount of $647 million for Québec.

When including this amount, Québec's share of the additional federal funding for health care stands at $4.7 billion over five years.

The federal government has also announced $1.7 billion over five years for Canada as a whole to support the remuneration of patient-care attendants. Québec expects this envelope to be shared between the provinces on a per capita basis.

**Additional federal funding for health care, Québec's share**

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) |
|  | **2023-<br> 2024** | **2024-<br> 2025** | **2025-<br> 2026** | **2026-<br> 2027** | **2027-<br> 2028** | **Total <br> 5 years** |
| CHT – One-time increase in 2023-2024 | 447 |  |  |  |  | 447 |
| CHT – Floor of 5% until 2027-2028 |  |  | 229 | 380 | 551 | 1 160 |
| Bilateral agreements | 497 | 494 | 492 | 490 | 488 | 2 461 |
| Long-term care | 131 | 130 | 129 | 129 | 128 | 647 |
| **TOTAL** | **1 075** | **624** | **850** | **999** | **1 167** | **4 715** |

---

For Québec, the federal contribution is clearly insufficient. It will not catch up to the historic level of federal funding, nor will it provide sustainable health care funding. The share of provincial health care spending covered by the federal government will continue to shrink due to the larger increase in provincial health care spending. As a result, Québec intends to continue to seek an increase in health transfers.

Budget 2023-2024 <br> H.38 Budget Plan

![](ex99-18_012.jpg)

**Ongoing decline in Québec's share of the equalization envelope**

Québec's share of the equalization envelope has been decreasing since 2020-2021 due to Québec's improved economic situation in comparison with the rest of Canada.

Québec's share in the equalization envelope, which was 66.2% in 2019-2020, is expected to decline to 52.1% in 2027-2028. This share could be less than 50% as of 2032-2033.

---

| |
|:---|
| **Expected change in Québec's share of the equalization envelope** |
| (per cent) |
| &nbsp;&nbsp;<br>![](ex99-18_005.jpg)  |

---

---

| | |
|:---|:---|
| Note: | A smoothing mechanism with lag is applied to determine equalization payments. For example, the equalization payments for the provinces for 2023-2024 are based on data for the years 2019-2020 (25%), 2020-2021 (25%) and 2021-2022 (50%). |
| Sources: | Department of Finance Canada and Ministère des Finances du Québec. |

---

Québec's Financial <br> Situation H.39

☐ Québec is the equalization recipient that receives the least per capita after Ontario

The provinces do not all have the same fiscal capacity; in other words, they do not all have the same ability to generate revenue.

Provinces whose fiscal capacity, in dollars per capita, is below the average of the ten provinces receive equalization payments. After equalization, they therefore have a fiscal capacity equivalent to the average of the ten provinces so that they can provide public services.<sup>10</sup>

In 2023-2024, six provinces will receive equalization payments: Manitoba, Ontario, Québec, New Brunswick, Nova Scotia and Prince Edward Island. Québec is the recipient that receives the least per capita ($1 639) after Ontario.

---

| |
|:---|
| CHART H. 2<br>**Equalization payments to the provinces – 2023-2024** |
| (dollars per capita) |
| &nbsp;&nbsp;<br> ![](ex99-18_006.jpg)  |
| Source: Department of Finance Canada. |

---

<sup>10</sup> The provinces' fiscal capacity is assessed on the basis of five tax bases (personal income tax, corporate income tax, consumption taxes, property taxes and natural resources).

Budget 2023-2024 <br> H.40 Budget Plan

![](ex99-18_012.jpg)

3.2 Change in expenditure

Expenditure consists, on the one hand, of portfolio expenditures tied to the delivery of public services, which are influenced by demographics and prices and, on the other hand, debt service, which is mainly driven by the level of debt and interest rates.

Expenditure totals $146.8 billion in 2022-2023, or $136.7 billion in portfolio expenditures and $10.1 billion in debt service.

It will stand at $147.9 billion in 2023-2024 and $151.4 billion in 2024-2025.

Expenditure will increase by 7.9% in 2022-2023, 0.7% in 2023-2024 and 2.4% in 2024-2025.

The growth of 7.9% in 2022-2023 results from:

a 7.4% increase in portfolio expenditures due, in particular, to new initiatives announced in Budget 2022-2023 and the December 2022 update;

a 16.4% increase in debt service due to rapidly rising interest rates.

From 2022-2023 to 2024-2025, expenditure will grow by an average of 3.6% per year.

TABLE H.17<br>**Change in expenditure**<br>

---

| | | | | |
|:---|:---|:---|:---|:---|
| (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) |
|  | **2022-2023** | **2023-2024** | **2024-2025** | **AAGR<sup>(1)</sup>** |
| Portfolio expenditures | 136 716 | 138 392 | 141 468 |  |
| &nbsp;&nbsp;&nbsp;*% change<sup>(2)</sup>* | *7.4* | *1.2* | *2.2* | *3.6* |
| Debt service | 10 053 | 9 464 | 9 925 |  |
| &nbsp;&nbsp;&nbsp;*% change<sup>(3)</sup>* | *16.4* | *–5.9* | *4.9* | *4.7* |
| **TOTAL** | **146 769** | **147 856** | **151 393** |  |
| &nbsp;&nbsp;&nbsp;***% change<sup>(2)</sup>*** | ***7.9*** | ***0.7*** | ***2.4*** | ***3.6*** |

---

(1) Average annual growth rate, corresponding to the geometric mean over three years, from 2022-2023 to 2024-2025.

(2) In 2023-2024, when excluding the impact of the COVID-19 support and recovery measures, portfolio expenditures grow by 5.1% and total expenditure, by 4.3%.

(3) The significant increase in debt service in 2022-2023 is due to the rapid increase in interest rates in 2022-2023, which results, in particular, in losses on the disposal of assets in the management of the investment activities of the Sinking Fund for Government Borrowing. The non-recurrence of these losses explains the decrease in debt service in 2023-2024.

Québec's Financial <br> Situation H.41

3.2.1 Portfolio expenditures

To achieve its objectives and carry out its activities, the government sets up programs that are administered by government entities, including departments and bodies. The set of entities under the responsibility of a minister constitutes a portfolio.

In an effort to provide more complete and detailed information, the budget documents now present the change in expenditures for nine departmental portfolios. This level of detail makes it possible, on the one hand, to ensure greater transparency and, on the other hand, to better inform parliamentarians and the public about the fiscal policy directions in the main areas of intervention.

TABLE H.18<br>**Change in expenditure by departmental portfolio**<br>

---

| | | | | |
|:---|:---|:---|:---|:---|
| (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) |
|  | **2022-2023** | **2023-2024** | **2024-2025** | **AAGR<sup>(1)</sup>** |
| Santé et Services sociaux | 58 109 | 59 015 | 60 275 |  |
| &nbsp;&nbsp;&nbsp;*% change<sup>(2)</sup>* | *12.0* | *7.7* | *3.6* | *7.7* |
| Éducation | 19 064 | 20 203 | 20 865 |  |
| &nbsp;&nbsp;&nbsp;*% change<sup>(3)</sup>* | *10.1* | *6.0* | *3.3* | *6.4* |
| Enseignement supérieur | 9 981 | 10 480 | 10 969 |  |
| &nbsp;&nbsp;&nbsp;*% change<sup>(4)</sup>* | *14.2* | *5.0* | *4.7* | *7.9* |
| Famille | 7 763 | 8 210 | 8 485 |  |
| &nbsp;&nbsp;&nbsp;*% change<sup>(5)</sup>* | *6.7* | *5.8* | *3.4* | *5.3* |
| Transports et Mobilité durable | 7 048 | 6 957 | 7 963 |  |
| &nbsp;&nbsp;&nbsp;*% change<sup>(6)</sup>* | *0.4* | *–1.3* | *14.5* | *4.3* |
| Emploi et Solidarité sociale | 9 136 | 5 250 | 5 016 |  |
| &nbsp;&nbsp;&nbsp;*% change<sup>(7)</sup>* | *9.1* | *–42.5* | *–4.4* | *–15.7* |
| Affaires municipales et Habitation | 4 680 | 4 546 | 4 617 |  |
| &nbsp;&nbsp;&nbsp;*% change<sup>(8)</sup>* | *32.3* | *–2.9* | *1.6* | *9.3* |
| Économie, Innovation et Énergie | 3 278 | 3 680 | 3 289 |  |
| &nbsp;&nbsp;&nbsp;*% change<sup>(9)</sup>* | *6.7* | *12.3* | *–10.6* | *2.3* |
| Environnement, Lutte contre les changements climatiques, Faune et Parcs | 2 003 | 2 283 | 2 308 |  |
| &nbsp;&nbsp;&nbsp;*% change<sup>(10)</sup>* | *17.6* | *14.0* | *1.1* | *10.7* |
| Other portfolios | 15 656 | 17 769 | 17 681 |  |
| &nbsp;&nbsp;&nbsp;*% change<sup>(11)</sup>* | *13.9* | *13.5* | *–0.5* | *8.7* |
| **TOTAL** | **136 716** | **138 392** | **141 468** |  |
| &nbsp;&nbsp;&nbsp;*% change<sup>(12)</sup>* | ***7.4*** | ***1.2*** | ***2.2*** | ***3.6*** |

---

Budget 2023-2024 <br> H.42 Budget Plan

![](ex99-18_012.jpg)

TABLE H.18<br>**Change in expenditure by departmental portfolio** (cont.)<br>

---

| | |
|:---|:---|
| Note: Totals may not add due to rounding. | Note: Totals may not add due to rounding. |
| (1) | Average annual growth rate, corresponding to the geometric mean over three years, from 2022-2023 to 2024-2025. |
| (2) | The growth in expenditures in 2024-2025 has been adjusted to take into account non-recurring expenditures in 2023-2024 related to the pandemic, lump sum payments under the government's wage offer and the effect of program review measures. Without these adjustments, the growth for 2024-2025 would be 2.1%. |
| (3) | In 2022-2023, the growth is primarily due to initiatives announced in Budget 2022-2023 and a lower expenditure level than that initially expected for 2021-2022. In 2023-2024 and 2024-2025, the expenditure growth is due to the increase in the costs tied to the delivery of services in educational institutions and the initiatives announced in Budget 2023-2024. |
| (4) | In 2022-2023, the growth is mainly due to the introduction of Québec Perspective scholarships in September 2022, the initiatives in Budget 2022-2023 and the enhancement of the student financial assistance program. In 2023-2024, the growth is due to the effect of Québec Perspective scholarships over a full year, the increase in the costs tied to the delivery of services in educational institutions and the initiatives in Budget 2023-2024. |
| (5) | The growth is due to the funding of new subsidized childcare spaces and the indexation of family allowance amounts. |
| (6) | In 2022-2023, the change is due to the effect of anticipated public transit projects in 2021-2022. In 2023-2024, the change is due to a one-time amount to fund public transit services, in particular to maintain services. In 2024-2025, the growth is mainly due to increased investment in public transit. |
| (7) | In 2023-2024, the decrease is -5.2%, excluding one-time cost of living support payments. This change is due to the decrease in the number of households receiving last-resort financial assistance, which is expected to be lower in 2023-2024 following the sharp increase in 2022-2023 originating from refugee protection claimants. In 2024-2025, the change in expenditures is primarily due to the adjustment to the planned spending of the Labour Market Development Fund. |
| (8) | The changes are due to housing measures, including the accelerated construction of social housing in 2022-2023. |
| (9) | In 2023-2024, the growth is due, in particular, to the increase in the cost of tax credits and the one-time increase in expenditures related to financial initiatives. In 2024-2025, the decrease is mainly due to the effect of non-recurring expenditures in 2023-2024, particularly those for the development of the battery industry. |
| (10) | The growth is primarily due to the implementation of measures from the 2030 Plan for a Green Economy and, in 2023-2024, is specifically due to the implementation of initiatives from the Plan Nature 2030. |
| (11) | The growth is primarily due to the initiatives announced in Budget 2022-2023 and Budget 2023-2024, the investments to offer better connectivity in all regions and the expected rise in costs tied to the delivery of public services due to inflation and population growth. |
| (12) | Excluding the impact of the COVID-19 support and recovery measures, growth in portfolio expenditures would be 5.1% in 2023-2024. |

---

Québec's Financial <br> Situation H.43

☐ Santé et Services sociaux

Expenditures of the Santé et Services sociaux portfolio consist primarily of the activities of bodies in the health and social services network and programs administered by the Régie de l'assurance maladie du Québec. This portfolio also includes the expenditures of other health-related government bodies, such as Héma-Québec.

These expenditures are influenced by changing demographics and the aging of the population, the remuneration of health care facility staff as well as the introduction of new technologies and new medications.

In 2022-2023, the growth in expenditures of 12.0%, before taking into account COVID-19 support and recovery measures, is due in particular to the enhanced senior assistance amount of $2 000, which represents 3.2 percentage points of expenditure growth, and Budget 2022-2023 measures to restore the health and social services system.

The 7.7% expenditure growth in 2023-2024 is due, in particular, to funding related to the recurring effects of the pandemic in the health care system and the effect of the measures to make the health care system more effective and more humane. The growth is also due to the anticipated increase in costs tied to the delivery of public services.

From 2022-2023 to 2024-2025, the Santé et Services sociaux portfolio will grow by an average of 7.7% per year.

☐ Éducation

Expenditures of the Éducation portfolio are primarily devoted to the activities of preschool, primary and secondary educational institutions. This portfolio also includes programs to promote recreation and sports, and to manage national parks.

In general, this portfolio's expenditures vary according to the evolution of the clienteles and the remuneration of the personnel of the school service centres and school boards.

In 2022-2023, the 10.1% growth in expenditures is primarily due to initiatives announced in Budget 2022-2023 to support student success and retention, including enhanced tutoring for students, and a lower expenditure level than that initially expected for 2021-2022.

In 2023-2024 and 2024-2025, the expenditure growth of 6.0% and 3.3%, respectively, is due to the expected increase in the costs of school service centres and school boards in relation to enhanced services, inflation and the increase in the school population, as well as the effect of the initiatives announced in Budget 2023-2024.

Budget 2023-2024 <br> H.44 Budget Plan

![](ex99-18_012.jpg)

☐ Enseignement supérieur

Expenditures of the Enseignement supérieur portfolio are mainly devoted to the activities of educational institutions at the college and university level. This portfolio also includes student financial assistance. In general, this portfolio's expenditures vary according to changes in the clientele and in the remuneration of college and university network personnel.

In 2022-2023, the 14.2% growth in expenditures is mainly due to the introduction of Québec Perspective scholarships in September 2022, the initiatives announced to improve access to higher education and the higher education graduation rate, as well as the enhancement of the student financial assistance program.

Furthermore, the growth is due to the effect of rising interest rates on student loans as this interest is temporarily being paid by the government due to the elimination of such interest for students.

In 2023-2024, the 5.0% growth in expenditures is due to the effect of Québec Perspective scholarships over a full year, initiatives announced in Budget 2023-2024 aimed at increasing the higher education graduation rate, as well as the expected increase in the costs of the institutions in the higher education network in relation to enhanced services, inflation and the increase in the school population.

☐ Famille

Expenditures in the Famille portfolio primarily include funding for educational childcare services and financial assistance for families.

From 2022-2023 to 2024-2025, expenditure will grow by an average of 5.3% per year. This growth is due to the funding of new subsidized childcare spaces, including staff salaries, as part of the measures of the action plan for completing the educational childcare services network, as well as the indexation of family allowance amounts.

☐ Transports et Mobilité durable

Expenditures in the Transports et Mobilité durable portfolio primarily include the construction, maintenance and operation of road infrastructure as well as the funding of public transit services. Expenditures also include the management of the government's rolling stock, air fleet and ferry services.

In 2022-2023, the 0.4% change in expenditures is primarily due to the effect of anticipated public transit projects in 2021-2022.

In 2023-2024, the -1.3% change in expenditures is primarily due to a one-time amount provided in 2022-2023 to fund the transit system, particularly to maintain services.

In 2024-2025, the 14.5% growth in expenditures is mainly due to increased investment in public transit.

Québec's Financial <br> Situation H.45

☐ Emploi et Solidarité sociale

Expenditures in the Emploi et Solidarité sociale portfolio mainly include financial assistance programs for individuals, including last-resort financial assistance, and employment assistance programs. They also include the activities of Services Québec, the Registrar of Civil Status and the Registraire des entreprises, as well as the administration of the Québec Parental Insurance Plan.

In 2023-2024, the -42.5% change in expenditures is mainly due to the non-recurrence of the one-time cost of living support payments. It is also due to the effect caused, in 2023-2024, by the number of households receiving last-resort financial assistance following the sharp increase in 2022-2023 originating from refugee protection claimants. Lastly, the change also stems from the decrease in activities related to the Information and Communication Technology Requalification and Training Program.

In 2024-2025, the change in expenditures of -4.4% is primarily due to the adjustment to the planned spending of the Labour Market Development Fund.

☐ Affaires municipales et Habitation

Expenditures in the Affaires municipales et Habitation portfolio mainly include financial support for municipalities, particularly for infrastructure, social housing and compensation in lieu of taxes, as well as regional and metropolitan development measures.

In 2022-2023, 2023-2024 and 2024-2025, the changes in expenditure of 32.3%, -2.9% and 1.6%, respectively, are due to the measures to construct social housing, including the accelerated construction of social housing in 2022-2023.

☐ Économie, Innovation et Énergie

Expenditures in the Économie, Innovation et Énergie portfolio are mainly allocated to funding economic development projects and support for research, innovation and development of energy resources.

In 2023-2024, the 12.3% increase in expenditures is mainly due to the increase in the cost of tax credits and the one-time increase in expenditures related to financial initiatives.

In 2024-2025, the -10.6% change in expenditures is mainly due to the effect of non-recurring expenditures in 2023-2024, particularly those for the development of the battery industry.

Budget 2023-2024 <br> H.46 Budget Plan

![](ex99-18_012.jpg)

☐ Environnement, Lutte contre les changements climatiques, Faune et Parcs

Expenditures in the Environnement, Lutte contre les changements climatiques, Faune et Parcs portfolio are primarily directed at funding measures to combat climate change, protect the environment and preserve biodiversity. These expenditures also include the operation of public dams, land management of the state's water domain and conservation of wildlife resources and habitats.

In 2022-2023 and 2023-2024, the expenditure growth of 17.6% and 14.0%, respectively, is primarily due to the implementation of measures from the 2030 Plan for a Green Economy, including the initiatives announced in Budget 2020-2021 aimed at funding public transit, and the implementation of initiatives from the Plan Nature 2030 in 2023-2024.

☐ Other portfolios

Expenditures in the other portfolios include expenditures in all other portfolios, which include, in particular, programs in the culture, immigration, tourism and natural resources sectors, as well as the activities of the judicial system, public security, international relations, the legislative branch and central agencies.

In 2022-2023, the 13.9% growth in expenditures is mainly due to the initiatives announced in Budget 2022-2023 and the investments to offer better connectivity in all regions.

In 2023-2024, the 13.5% expenditure growth is primarily due to the initiatives announced in Budget 2023-2024 and the expected rise in costs tied to the delivery of public services due to inflation and population growth.

Québec's Financial <br> Situation H.47

**The government offers salary increases to the unions representing public and parapublic sector employees**

On December 15, 2022, the Minister Responsible for Government Administration and Chair of the Conseil du trésor presented the government's offers to unions representing public and parapublic sector employees as part of negotiations to renew the collective agreements of government employees.

– The agreements entered into with most government employees for the period 2020-2023 will expire on March 31, 2023.

The government is offering total increases of 11.50% over five years, which will ultimately correspond to an additional $4.6 billion in remuneration spending concerning public and parapublic sector employees. These increases are included in the financial framework of Budget 2023-2024.

Wage parameters of 9.00% are proposed over the five-year period.

In addition, increases of 2.50% are offered over five years aimed, in particular, at meeting government priorities.

While presenting the offers, the government stressed the importance of opening up a broader discussion to support the negotiation process by engaging all stakeholders, regardless of structure. On February 22, 2023, the government tabled the contents of its priorities, representing an investment of $700 million. These priorities are aimed at eliminating the real obstacles and challenges surrounding the desired improvements in the concerned networks and respectively focus on:

– the classroom team and, in particular, adding classroom support for teaching staff;

– the care team and, in particular, sharing tasks, implementing self-managed and atypical schedules, reducing overtime and eliminating mandatory overtime for nursing staff;

– the mental health team and, in particular, improving the service offer for the population.

In addition to the above, the government is proposing a lump sum payment of up to $1 000 for all employees in 2022-2023, calculated based on the hours paid during that period, representing a non-recurring investment of 1.50%.

**Negotiation financial framework**

(per cent, unless otherwise indicated)

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| | **2023-<br> 2024** | **2024-<br> 2025** | **2025-<br> 2026** | **2026-<br> 2027** | **2027-<br> 2028** | **Total<br> 5 years** |
| Wage parameters | 3.00 | 1.50 | 1.50 | 1.50 | 1.50 | 9.00 |
| Government priorities |  |  |  |  |  |  |
| Sectoral measures | Measures with monetary value to be determined | Measures with monetary value to be determined | Measures with monetary value to be determined | Measures with monetary value to be determined | Measures with monetary value to be determined | 2.50 |
| Other enhancements |  |  |  |  |  |  |
| **Total recurrent** | **3.50** | **2.00** | **2.00** | **2.00** | **2.00** | **11.50** |
| Lump sum<sup>(1)</sup> | $1 000 |  |  |  |  |  |

---

(1) Based on hours paid for the period April 1, 2022 to March 31, 2023.

Source: Secrétariat du Conseil du trésor.

Budget 2023-2024 <br> H.48 Budget Plan

![](ex99-18_012.jpg)

**COVID-19 support and recovery measures**

Unlike previous budget publications, the level of portfolio expenditures presented includes expenditures related to COVID-19 support and recovery measures. This new way of presenting portfolio expenditures is due to the lower volume of such measures over the period covered by the financial framework.

The measures still in place in 2022-2023 include the following in particular:

– in health, initiatives introduced to combat COVID-19, including screening, vaccination, the acquisition of antivirals and additional financial incentives for clinical staff in health care establishments;

– in education, specialized educational support to consolidate learning for elementary and secondary school students;

– in higher education, the elimination of interest on student loans;

– measures to support public transit and tourism.

Expenditures related to COVID-19 support and recovery measures total $5.1 billion in 2022-2023.

**COVID-19 support and recovery measures**

---

| | |
|:---|:---|
| (millions of dollars) | (millions of dollars) |
|  | **2022-2023** |
| Santé et Services sociaux | 4 058 |
| Éducation | 60 |
| Enseignement supérieur | 145 |
| Transports et Mobilité durable | 327 |
| Other portfolios | 470 |
| **TOTAL** | **5 060** |

---

Québec's Financial <br> Situation H.49

3.2.2 Debt service

Debt service consists of interest on the direct debt as well as interest on the liability for the retirement plans and other future benefits of public and parapublic sector employees.

Debt service changes primarily according to the level of debt, interest rates and the return on the Retirement Plans Sinking Fund (RPSF). It will stand at $10.1 billion in 2022-2023, $9.5 billion in 2023-2024, and $9.9 billion in 2024-2025, which represents changes of 16.4%, -5.9%, and 4.9%, respectively.

In 2022-2023, 2023-2024 and 2024-2025, interest on the direct debt will change by 19.7%, -3.2% and 7.0%, respectively, owing, in particular, to the anticipated change in interest rates.

— The rapid increase in interest rates in 2022-2023 results notably, in losses on the disposal of assets in the management of the investment activities of the Sinking Fund for Government Borrowing. The non-recurrence of these losses explains the decrease in debt service in 2023-2024.

Interest on the liability for the retirement plans and other employee future benefits is decreasing due to the increase in the investment income of the RPSF. The income of the RPSF is deducted from debt service.

In 2021-2022, the RPSF yielded a return of 9.14%,<sup>11</sup> while a zero return is forecast in 2022-2023 due to the decline in the stock and bond markets. For subsequent years, the expected long-term RPSF return of 6.35% is used to calculate this income.

— It should be noted that yield spreads are gradually incorporated into the financial framework in accordance with generally accepted accounting principles (GAAP). The RPSF return for 2022-2023 will be known in spring 2023.

<sup>11</sup> The return based on a fiscal year, from April to March.

Budget 2023-2024 <br> H.50 Budget Plan

![](ex99-18_012.jpg)

TABLE H.19<br>**Change in debt service**<br>

---

| | | | | |
|:---|:---|:---|:---|:---|
| (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) |
|  | **2022-2023** | **2023-2024** | **2024-2025** | **AAGR<sup>(1)</sup>** |
| Interest on direct debt<sup>(2)</sup> | 9 660 | 9 349 | 10 003 |  |
| &nbsp;&nbsp;&nbsp;*% change* | *19.7* | *–3.2* | *7.0* |  |
| Interest on the liability for retirement plans and other employee future benefits<sup>(3)</sup> | 393 | 115 | –78 |  |
| **TOTAL** | **10 053** | **9 464** | **9 925** |  |
| &nbsp;&nbsp;&nbsp;***% change*** | ***16.4*** | ***–5.9*** | ***4.9*** | ***4.7*** |

---

(1) Average annual growth rate, corresponding to the geometric mean over three years, from 2022-2023 to 2024-2025.

(2) Interest on the direct debt includes the income of the Sinking Fund for Government Borrowing. This income, which is deducted from debt service, consists of interest generated on investments as well as gains and losses on disposal. The forecast for this income may be adjusted upward or downward since it is closely tied to the change in interest rates and market behaviour.

(3) This interest corresponds to the interest on obligations relating to the retirement plans and other future benefits of public and parapublic sector employees, minus mainly the investment income of the RPSF.

**Comparison of the debt service of governments in Canada**

In 2021-2022, Québec's debt service represented 6.2% of its revenue.

– Debt service is the government's fourth-largest expenditure category after health, education and higher education.

– Québec's debt service as a proportion of revenue is higher than in many other provinces. This is due to Québec's relatively larger debt.

---

| |
|:---|
| **Debt service of governments in Canada in 2021-2022** |
| (percentage of revenue) |
| <br>![](ex99-18_007.jpg)  |

---

Sources: Public accounts.

Québec's Financial <br> Situation H.51

---

| |
|:---|
| &nbsp;&nbsp; **Use of the Generations Fund**<br> **to repay borrowings** |
| &nbsp;&nbsp; As at March 31, 2023, the balance of the Generations Fund will stand at $19.2 billion. The government is announcing that withdrawals of $2.5 billion per year will be made in 2023-2024 and 2024-2025.<br>These withdrawals will serve to reduce the financing program and alleviate debt service in the current interest rate climate.<br>The savings in interest associated with these withdrawals are estimated at $801 million over five years, from 2023-2024 to 2027-2028.<br>|

---

Budget 2023-2024 <br> H.52 Budget Plan

![](ex99-18_012.jpg)

4. Public infrastructure investments

Québec has significant public infrastructure needs. To meet them, the government is announcing an increase of $7.5 billion over 10 years under the 2023-2033 Québec Infrastructure Plan (QIP).

The 2023-2033 QIP therefore amounts to $150 billion, or $15 billion per year on average.

Over the past five years, the QIP has been increased each year, going from $100.4 billion in March 2018 to $150 billion in March 2023.

These substantial investments will serve, in particular, to repair and build schools and health care institutions, maintain the road network and develop public transit infrastructure.

The 2023-2033 QIP allocates considerable sums to health and social services ($24.2 billion), education and higher education ($30.0 billion), public transit ($15.4 billion)<sup>12</sup> and the road network ($31.5 billion).<sup>13</sup>

---

| |
|:---|
| <br> CHART H.3 <br>**Change in the Québec Infrastructure Plan** |
| (billions of dollars) |

---

<sup>12</sup> These investments include those provided for in the central envelope.

<sup>13</sup> The Secrétariat du Conseil du trésor's 2023-2033 Québec Infrastructure Plan provides detailed information on planned investments by sector.

Québec's Financial <br> Situation H.53

☐ Annual investments of $15 billion on average

Investments of $82.5 billion are planned over the next five years, representing 55% of the 2023-2033 QIP. These record investments will contribute to increasing Québec's economic potential in the long term.

The financial impact of the increase in the QIP is estimated at $1.0 billion over five years, from 2023-2024 to 2027-2028. This includes the impact on portfolio expenditures and debt service.

CHART H.4 <br>**Annual investments in the 2023-2033 Québec Infrastructure Plan**

(billions of dollars)

![](ex99-18_009.jpg)

(1) The investments in 2021-2022 include $1.4 billion
in financial assistance advance payments for infrastructure.

---

| | |
|:---|:---|
| (2) | The investments in 2022-2023 include $0.8 billion in financial assistance advance payments for infrastructure. |
| Source: Secrétariat du Conseil du trésor. | Source: Secrétariat du Conseil du trésor. |

---

Budget 2023-2024 <br> H.54 Budget Plan

![](ex99-18_012.jpg)

☐ A significant share of the QIP allocated to public infrastructure maintenance

Continued significant investments are necessary to maintain public infrastructure in good condition. Some public infrastructure is aging and requires repairs.

A 60% share of the investments under the 2023-2033 QIP will be used for infrastructure maintenance.<sup>14</sup> New infrastructure will account for 40% of the investments.

CHART H.5 <br>**2023-2033 Québec Infrastructure Plan by type of investment**

(per cent)

Source: Secrétariat du Conseil du trésor.

<sup>14</sup> This share excludes the central envelope.

Québec's Financial <br> Situation H.55

**Appendix 1: Portfolio expenditures**

TABLE H.20 <br>**Portfolio expenditure forecasts**

---

| | | |
|:---|:---|:---|
| (millions of dollars) | (millions of dollars) | (millions of dollars) |
|  | **2022-2023** | **2023-2024** |
| Affaires municipales et Habitation | 4 680 | 4 546 |
| Agriculture, Pêcheries et Alimentation | 1 347 | 1 504 |
| Conseil du trésor et Administration gouvernementale | 1 225 | 2 797 |
| Conseil exécutif | 803 | 862 |
| Culture et Communications | 1 811 | 1 904 |
| Cybersécurité et Numérique | 134 | 173 |
| Économie, Innovation et Énergie | 3 278 | 3 680 |
| Éducation | 19 064 | 20 203 |
| Emploi et Solidarité sociale | 9 136 | 5 250 |
| Enseignement supérieur | 9 981 | 10 480 |
| Environnement, Lutte contre les changements climatiques, Faune et Parcs | 2 003 | 2 283 |
| Famille | 7 763 | 8 210 |
| Finances | 3 382 | 3 242 |
| Immigration, Francisation et Intégration | 442 | 727 |
| Justice | 1 515 | 1 481 |
| Langue française | 54 | 63 |
| National Assembly | 166 | 173 |
| Officers of the National Assembly | 232 | 139 |
| Relations internationals et Francophonie | 191 | 170 |
| Ressources naturelles et Forêts | 1 318 | 1 474 |
| Santé et Services sociaux | 58 109 | 59 015 |
| Sécurité publique | 2 299 | 2 336 |
| Tourisme | 534 | 503 |
| Transports et Mobilité durable | 7 048 | 6 957 |
| Travail | 202 | 220 |
| **TOTAL** | **136 716** | **138 392** |

---

Note: Totals may not add due to rounding.

Québec's Financial <br> Situation H.57

![](ex99-18_012.jpg)

**Appendix 2: Supplementary information**

The digital dissemination of content reflects the department's desire to improve messages addressed to the public by using electronic documents that can be viewed on a smartphone, tablet or computer.

The Ministère des Finances is promoting the transition to digital documents. Therefore, certain supplementary budgetary information is presented only on the department's website, including:

— *Budget by the Numbers*, which presents the main budgetary data in the form of tables and interactive charts;

— sensitivity analyses, the main risks to Québec's financial position and prudence factors;

— the government's net financial surpluses or requirements.

In addition, the document *Processus et documentation budgétaires: une reddition de comptes sur les finances publiques de l'État* (in French only) provides information on the budget planning process and financial framework development carried out by the Ministère des Finances and highlights budget documents in support of the government's budgetary cycle.

&nbsp;&nbsp; <br> This supplementary information is available on the Ministère des Finances website. To view this information, visit the Budget 2023-2024 documents page at:<br><u>www.finances.gouv.qc.ca/Budget_and_update/budget/</u><br>The document *Processus et documentation budgétaires : une reddition de comptes sur les finances publiques de l'État* (in French only) can be found on the Budget 2022-2023 page:<br><u>www.finances.gouv.qc.ca/Budget_and_update/budget/2022-2023/</u><br>

Québec's Financial <br> Situation H.59

## Exhibit 99.19

------

**Exhibit 99.19**

**Section I**

**The QuEbec Government's Debt**

---

| | | | |
|:---|:---|:---|:---|
| **Summary** | **Summary** | **Summary** | **I.3** |
| **1.** | **Québec's debt** | **Québec's debt** | **I.5** |
|  | 1.1 | The new debt reduction objective | I.5 |
|  |  | Revenues that will be dedicated to the Generations Fund | I.8 |
|  | 1.2 | Different concepts of debt | I.12 |
|  | 1.3 | Gross debt | I.13 |
|  | 1.4 | Net debt | I.18 |
|  | 1.5 | Debt representing accumulated deficits | I.22 |
| **2.** | **Financing** | **Financing** | **I.25** |
|  | 2.1 | Financing program | I.25 |
|  | 2.2 | Borrowings contracted in 2022-2023 | I.27 |
|  | 2.3 | Debt management strategy | I.30 |
|  | 2.4 | Yield on Québec's debt securities | I.33 |
| **3.** | **Information on retirement plans and funds deposited by the Ministère des Finances with the Caisse de dépôt et placement du Québec** | **Information on retirement plans and funds deposited by the Ministère des Finances with the Caisse de dépôt et placement du Québec** | **I.35** |
|  | 3.1 | Net liability for retirement plans | I.35 |
|  | 3.2 | Returns on funds deposited with the Caisse de dépôt et placement du Québec | I.37 |
| **4.** | **Credit ratings** | **Credit ratings** | **I.39** |
|  | 4.1 | Québec's credit ratings | I.39 |
|  | 4.2 | Comparison of the credit ratings of Canadian provinces | I.40 |

---

I.1

![](ex99-19_001.jpg)

**Summary**

As at March 31, 2023, the gross debt-to-GDP ratio will stand at 40.2%. This ratio is below the 45% objective established in the *Act to reduce the debt and establish the Generations Fund*.

This is also lower than the level that prevailed before the pandemic, which was 43.5% of GDP as at March 31, 2020. This is due to sound management of public finances and significant economic growth in 2021 and 2022.

Québec has made remarkable progress in reducing its debt load in recent decades, but remains one of the most indebted provinces.

Reducing the debt burden remains a priority for the government. In addition to promoting greater intergenerational fairness, it contributes positively to economic growth by creating a climate of confidence conducive to private investment and higher productivity.

&nbsp;&nbsp;&nbsp;&nbsp; **The government is announcing that it will reduce the net debt burden, which will stand at 37.4% of GDP as at March 31, 2023, to 30% of GDP by 2037-2038.<sup>1</sup>**<br>**Québec's net debt burden will therefore gradually move toward the current average net debt of the provinces.**<br>

The government's debt reduction strategy will rest on three key elements:

— the return to a balanced budget by 2027-2028 and the maintenance of that balance subsequently, after deposits of dedicated revenues in the Generations Fund;

— deposits in the Generations Fund which will continue to increase starting in 2024-2025;

— accelerated economic growth, stimulated by government action, that will contribute to reducing the relative weight of the debt.

Just as it did when the Generations Fund was established in 2006, the government will continue to bank on the wealth of Québec's hydroelectricity to reduce the debt.

<sup>1</sup> Changes to the *Act to reduce the debt and establish the Generations Fund* will be proposed in this regard.

The Québec <br> Government's Debt I.3

As of 2023-2024, the Generations Fund will receive water-power royalties on an annual basis as well as $650 million from the dividend paid by Hydro-Québec to the government. The revenue from the investment of the sums will also continue to contribute to debt reduction.

In 2023-2024, revenues dedicated to the Generations Fund will amount to $2.4 billion. They will increase gradually to reach $2.8 billion in 2027-2028 and nearly $5.0 billion in 2037-2038.

— Payments to the Generations Fund will not be subject to an annual cap.

The portion of the amounts provided for in the March 2022 budget that will not be deposited in the Generations Fund will be allocated to the financing of the 1-percentage-point reduction in the first two tax brackets as of 2023. This is a one-time gesture for the government.

As at March 31, 2023, the balance of the Generations Fund will amount to $19.2 billion. The government is announcing that withdrawals of $2.5 billion per year will be made in 2023-2024 and 2024-2025.

These withdrawals will serve to reduce the financing program and alleviate debt service in the current context of high interest rates.

The government is also announcing that it will begin withdrawing sums from the Retirement Plans Sinking Fund (RPSF) starting in 2024-2025 to provide for the payment of pension benefits to government employees. Indeed, it is expected that the amounts accumulated in the RPSF will exceed the government's pension liabilities in future years. These withdrawals will help reduce the financing program.

Lastly, a new accounting standard on the recognition of asset retirement obligations came into effect in 2022-2023. For Québec, the main obligation in this regard relates to the presence of asbestos in buildings and roads.

This new liability is estimated at $7.6 billion as at April 1, 2022. It will have an equivalent impact on net debt.<sup>2</sup>

<sup>2</sup> As at April 1, 2022, the new standard will have no impact on gross debt. Capital investments and accumulated deficits will be impacted, but not debt on financial markets.

Budget 2023-2024 <br> I.4 Budget Plan

![](ex99-19_001.jpg)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Québec's debt

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1 The new debt reduction objective

Québec has made remarkable progress in reducing its debt load in recent decades but remains one of the most indebted provinces. Reducing the debt burden remains a priority for the government.

The *Act to reduce the debt and establish the Generations Fund* was adopted in 2006. By reducing the debt burden, it aims to ensure the long-term financing of the government's main missions as well as a prosperous tomorrow for future generations.

Since 2010, the Act stipulates that for fiscal 2025-2026, the gross debt must not exceed 45% of GDP, while the debt representing accumulated deficits must not exceed 17% of GDP. These targets were set as a result of the 2008 financial crisis and changes to government accounting, which made it impossible to reach the targets established in 2006.

As at March 31, 2023, the gross debt-to-GDP ratio will stand at 40.2%, which is below the 45% objective. The accumulated deficit debt-to-GDP ratio will stand at 20.5%.

☐ A gradual reduction of the net debt to 30% of GDP over the next 15 years

As at March 31, 2023, the net debt will stand at 37.4% of GDP. The government is announcing that it intends to gradually reduce the net debt to within a range of 27.5% of GDP to 32.5% of GDP within the next 15 years, that is, by fiscal year 2037-2038.<sup>3</sup>

The median net debt reduction target will therefore stand at 30% of GDP.

Based on this target, Québec's net debt burden will therefore gradually move toward the current average net debt of the provinces (31% of GDP as at March 31, 2022).

The government also aims for the net debt burden to be 33% of GDP by 2032-2033. This is an intermediate target.

At a time when it is difficult to forecast how the economy will change over the long term, the government has decided to provide an interval for these two targets. This will allow it to respond to negative economic shocks or to increase investment, if necessary, in public infrastructure.

---

| | |
|:---|:---|
| TABLE I. 1<br>**The new debt reduction targets** | TABLE I. 1<br>**The new debt reduction targets** |
| Net debt by 2032-2033 (intermediate target) | 33% of GDP (±2.5% of GDP) |
| Net debt by 2037-2038 | 30% of GDP (±2.5% of GDP) |

---

<sup>3</sup> Changes to the *Act to reduce the debt and establish the Generations Fund* will be proposed in this regard.

The Québec <br> Government's Debt I.5

---

| |
|:---|
| **The importance of setting a long-term objective** |
| &nbsp;&nbsp; Setting a long-term debt reduction objective is an excellent way of ensuring sound management of public finances because it makes the government accountable to citizens and parliamentarians year after year, which results in more transparent, efficient government action.<br>This long-term orientation reduces uncertainty and contributes to economic growth. Citizens and businesses can better anticipate the government's budgetary and fiscal policies, allowing them to make better decisions.<br>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; — For example, thanks to debt reduction objectives, the government can plan its annual public infrastructure investments over a long period, that is, 10 years.<br>It also makes it possible to work toward achieving a common objective, which, in this case, is to ensure the long-term financing of the government's main missions and to not leave future generations with the heavy burden of repaying the debt, thus promoting greater intergenerational fairness.<br>Lastly, this orientation sends a positive signal to investors and credit rating agencies, since the gradual reduction of the debt burden is undoubtedly the strongest indicator of sound management of public finances.<br>|
| **Accountability based on net debt** |
| &nbsp;&nbsp; Like Ontario and other provinces, Québec will focus its reporting on net debt, which is a concept also used by the OECD and the IMF. The net debt:<br>— takes into account the government's borrowings arising from substantial capital investments;<br>— subtracts financial assets that will ultimately be used to reduce the debt on financial markets;<br>— is readily comparable from one province to another.<br>However, information on all concepts of debt will continue to be presented to meet the needs of the different budget document users.<br>|

---

Budget 2023-2024 <br> I.6 Budget Plan

![](ex99-19_001.jpg)

☐ The benefits of reducing the debt burden and the elements of the strategy put in place to achieve it

Reducing the debt burden contributes to economic growth by creating a climate of confidence conducive to private investment and higher productivity.

In addition to supporting collective prosperity, reducing the debt burden will allow Québec to:

— contribute to intergenerational fairness;

— ensure stable funding for the government's main missions, including health and education;

— cope with the costs associated with an aging population;

— implement measures to fight climate change;

— fund substantial investments in public infrastructure;

— ease the tax burden of Quebecers;

— counter a new recession;

— increase its financial autonomy within the federation.

The government's debt reduction strategy will rest on three key elements:

— the return to a balanced budget by 2027-2028 and the maintenance of that balance subsequently, after deposits of dedicated revenues in the Generations Fund;

— deposits in the Generations Fund which will continue to increase starting in 2024-2025;

— accelerated economic growth, stimulated by government action, that will contribute to reducing the relative weight of the debt.

The Québec <br> Government's Debt I.7

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.1.1 Revenues that will be dedicated to the Generations Fund

The Generations Fund is an important pillar of the debt reduction strategy. Just as it did when the Generations Fund was established in 2006, the government will continue to bank on the wealth of Québec's hydroelectricity.

As of 2023-2024, three sources of revenue will be dedicated to the Generations Fund:

— water-power royalties, which are paid by Hydro-Québec and private hydroelectricity producers;

an additional contribution from Hydro-Québec, which will be set at $650 million per year;

— This contribution will be taken from the dividend paid by Hydro-Québec to the government. It will have no impact on hydroelectricity rates.

— income generated by the investment of the sums making up the Generations Fund.<sup>4</sup>

Deposits in the Generations Fund will not be subject to an annual cap.

From 2023-2024 to 2027-2028, deposits in the Generations Fund are expected to average $2.6 billion per year. This is a higher amount than the average of the last 10 years. From 2013-2014 to 2022-2023, revenues dedicated to the Generations Fund averaged $2.5 billion per year.

In 2023-2024, revenues dedicated to the Generations Fund will amount to $2.4 billion.<sup>5</sup> They will increase gradually to reach $2.8 billion in 2027-2028 and nearly $5.0 billion in 2037-2038.

Without these changes, revenues dedicated to the Generations Fund would have amounted to $3.9 billion in 2023-2024 and $5.4 billion in 2027-2028.

<sup>4</sup> Changes to the *Act to reduce the debt and establish the Generations Fund* will be proposed in this regard. The revenues resulting from the indexation of the price of heritage electricity, mining revenues, an annual sum of $500 million from the specific tax on alcoholic beverages and unclaimed property will no longer be deposited in the Generations Fund. Moreover, donations, legacies and other contributions received by the Minister of Finance may continue to be deposited in the Generations Fund.

<sup>5</sup> The portion of the amounts provided for in the March 2022 budget that will not be deposited in the Generations Fund will be allocated to the financing of the 1-percentage-point reduction in the first two tax brackets as of 2023.

Budget 2023-2024 <br> I.8 Budget Plan

☐ Use of the Generations Fund to repay borrowings

As at March 31, 2023, the balance of the Generations Fund will amount to $19.2 billion. The government is announcing that withdrawals of $2.5 billion per year will be made in 2023-2024 and 2024-2025.

These withdrawals will serve to reduce the financing program and alleviate debt service in the current context of high interest rates.

The interest savings associated with these withdrawals are estimated at $801 million over five years, that is, from 2023-2024 to 2027-2028.

TABLE I.2 <br>**Generations Fund** 

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) |
|  | **2023-<br> 2024-** | **2024-<br> 2025-** | **2025-<br> 2026-** | **2026-<br> 2027-** | **2027-<br> 2028-** |
| **Book value, beginning of year<sup>(1)</sup>** | **19 180** | **19 053** | **18 940** | **21 464** | **24 171** |
| **Dedicated revenues** |  |  |  |  |  |
| Water-power royalties |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Hydro-Québec | 825 | 845 | 868 | 932 | 931 |
| &nbsp;&nbsp;&nbsp;&nbsp;Private producers | 109 | 109 | 112 | 114 | 116 |
| &nbsp;&nbsp;&nbsp;&nbsp;**Subtotal** | **934** | **954** | **980** | **1 046** | **1 047** |
| Additional contribution from Hydro-Québec | 650 | 650 | 650 | 650 | 650 |
| Investment income<sup>(2)</sup> | 789 | 783 | 894 | 1 011 | 1 136 |
| **Total dedicated revenues** | **2 373** | **2 387** | **2 524** | **2 707** | **2 833** |
| Use of the Generations Fund to repay borrowings | -2 500 | -2 500 |  |  |  |
| **BOOK VALUE, END OF YEAR** | **19 053** | **18 940** | **21 464** | **24 171** | **27 004** |
|  ***% of net debt*** | ***8.9*** | ***8.6*** | ***9.5*** | ***10.5*** | ***11.6*** |
|  ***% of GDP*** | ***3.4*** | ***3.2*** | ***3.5*** | ***3.8*** | ***4.1*** |

---

(1) For information purposes, as at December 31, 2022,
the fair value of the Generations Fund was $17.8 billion, $0.3 billion less than its book value.

(2) The investment income of the Generations Fund corresponds to
realized investment income (interest income, dividends, gains on the disposal of assets, etc.). Therefore, the forecast may be adjusted
upward or downward according to when the gains or losses are actually realized. An annual return of 4.6% is expected, a rate based on six
historic years.

The Québec <br> Government's Debt I.9

**Returns of the Generations Fund**

The sums dedicated annually to the Generations Fund will continue to be deposited with the Caisse de dépôt et placement du Québec.

Since the first deposit was made in the Generations Fund in January 2007, the return has been higher than the cost of new borrowings by the government 14 years out of 16.

From 2007 to 2022, the average return was 5.3%, while the average cost of new borrowings was 3.1%, which represents a difference of 2.2 percentage points.

These returns contribute to reducing the debt burden.

**Comparison of the Generations Fund's annual return and the Québec government's borrowing costs**

---

| | | | |
|:---|:---|:---|:---|
| (per cent, on a calendar year basis) | (per cent, on a calendar year basis) | (per cent, on a calendar year basis) | (per cent, on a calendar year basis) |
|  | **Rate of return of the Generations Fund** | **Cost of new borrowings<sup>(1)</sup>** | ***Difference<br> (percentage points)*** |
| 2007 | 5.6 | 4.7 | *0.9* |
| 2008 | –22.4 | 4.5 | *–26.9* |
| 2009 | 11.3 | 4.4 | *6.9* |
| 2010 | 12.3 | 4.1 | *8.2* |
| 2011 | 4.0 | 3.7 | *0.3* |
| 2012 | 8.4 | 3.0 | *5.4* |
| 2013 | 12.0 | 3.3 | *8.7* |
| 2014 | 11.7 | 3.2 | *8.5* |
| 2015 | 8.1 | 2.4 | *5.7* |
| 2016 | 7.3 | 2.2 | *5.1* |
| 2017 | 8.5 | 2.5 | *6.0* |
| 2018 | 4.4 | 2.9 | *1.5* |
| 2019 | 9.5 | 2.3 | *7.2* |
| 2020 | 7.0 | 1.5 | *5.5* |
| 2021 | 11.4 | 1.9 | *9.5* |
| 2022 | –7.9 | 3.5 | *–11.4* |

---

(1) The government's borrowing costs correspond to the yield on 10-year maturity Québec bonds. <br> Source: PC-Bond for the yield on 10-year maturity Québec bonds.

Budget 2023-2024 <br> I.10 Budget Plan

![](ex99-19_001.jpg)

☐ A long-term forecast of the evolution of the net debt burden

The Ministère des Finances conducts detailed five-year debt forecasts. For information purposes, a forecast of the net debt-to-GDP ratio has been made up to 2037-2038.

Based on this forecast, it is expected that the net debt-to-GDP ratio may decline to less than 28% by 2037-2038.<sup>6</sup>

— If no changes were made to the revenues dedicated to the Generations Fund, Québec would reach this level of indebtedness five years earlier, that is, by 2032-2033.

The government's objective is to gradually reduce the net debt to within a range of 27.5% of GDP to 32.5% of GDP within the next 15 years, that is, by fiscal year 2037-2038, with a median target of 30% of GDP.

---

| |
|:---|
| CHART I.1 <br>**Net debt projection as at March 31 before and after changes to the revenues dedicated to the Generations Fund** |
| (percentage of GDP) |

---

![](ex99-19_002.jpg)

<sup>6</sup> It should be noted that an additional decrease in the first two tax brackets of 0.25 percentage points per year from 2027 to 2032 would have an upward effect on the net debt burden estimated at 3.2 percentage points of GDP as at March 31, 2038.

The Québec <br> Government's Debt I.11

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.2 Different concepts of debt

A number of different concepts of debt are used to measure a government's indebtedness.

**Gross debt** corresponds to the debt on financial markets, plus the commitments made with regard to the retirement plans of government employees. The balance of the Generations Fund is subtracted from gross debt.

As at March 31, 2023, Québec's gross debt will stand at $222.6 billion, or 40.2% of GDP.

**Net debt** corresponds to the government's liabilities as a whole, less its financial assets. Several other provinces use this concept to present the change in their debt.<sup>7</sup>

As at March 31, 2023, Québec's net debt will stand at $206.8 billion, or 37.4% of GDP.

**Debt representing accumulated deficits** corresponds to the difference between the government's assets and liabilities. It is the debt that does not correspond to any assets. This is the concept that the federal government uses to present the change in its debt.

As at March 31, 2023, Québec's debt representing accumulated deficits will stand at $113.3 billion, or 20.5% of GDP.

TABLE I.3 <br>**Québec government debt as at March 31 according to various concepts**<br>

---

| | | | |
|:---|:---|:---|:---|
| (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) |
|  | **2022** | **2023** | **2024** |
| **GROSS DEBT<sup>(1)</sup>** | **210 952** | **222 606** | **235 600** |
| &nbsp;&nbsp;&nbsp;*% of GDP* | *41.8* | *40.2* | *41.5* |
| Less: Financial assets, net of other liabilities<sup>(2)</sup> | -18 744 | -15 761 | -21 156 |
| **NET DEBT** | **192 208** | **206 845** | **214 444** |
| &nbsp;&nbsp;&nbsp;*% of GDP* | *38.1* | *37.4* | *37.7* |
| Less: Non-financial assets | -87 016 | -93 533 | -99 507 |
| **DEBT REPRESENTING ACCUMULATED DEFICITS** | **105 192** | **113 312** | **114 937** |
| &nbsp;&nbsp;&nbsp;*% of GDP* | *20.9* | *20.5* | *20.2* |

---

(1) The gross debt excludes pre-financing and takes into account
the sums accumulated in the Generations Fund.

(2) Financial assets include, in particular, participations in government
enterprises (e.g., Hydro-Québec) and accounts receivable. Other liabilities (e.g., accounts payable) are subtracted.

<sup>7</sup> The OECD and the IMF compare countries' debt using, in particular, their net debt.

Budget 2023-2024 <br> I.12 Budget Plan

![](ex99-19_001.jpg)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.3 Gross debt

Gross debt corresponds to the amount of debt contracted on financial markets (direct debt) plus the net liability for the pension plans and other future benefits of public and parapublic sector employees, minus the balance of the Generations Fund.

The gross debt burden will stand at 40.2% of GDP as at March 31, 2023, which is below the 45% objective set in the *Act to reduce the debt and establish the Generations Fund*. This objective was set in 2010.

This is also lower than the level that prevailed before the pandemic, which was 43.5% of GDP as at March 31, 2020.

The gross debt is expected to remain stable over the next five years.

Furthermore, as of 2025-2026, sums accumulated in the Retirement Plans Sinking Fund (RPSF) to cover the retirement benefits of government employees are projected to exceed the government's liability in this regard.

— Therefore, the government will be in a net asset position with regard to retirement plans and other employee future benefits.

In this context, the government is announcing that it will begin withdrawing sums from the RPSF to provide for the payment of pension benefits to government employees. An initial withdrawal of $1 billion will take place in 2024-2025. These withdrawals, which will help reduce the financing program, will gradually increase thereafter.

TABLE I.4 <br>**Gross debt as at March 31**

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) |
|  | **2022** | **2023** | **2024** | **2025** | **2026** | **2027** | **2028** |
| Direct debt | 217 324 | 234 916 | 251 130 | 262 871 | 274 855 | 285 048 | 295 435 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Plus: Retirement plans and other employee future benefits<sup>(1)</sup> | 9 457 | 6 870 | 3 523 | 654 | -1 370 | -2 728 | -3 236 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Less: Generations Fund | -15 829 | -19 180 | -19 053 | -18 940 | -21 464 | -24 171 | -27 004 |
| **GROSS DEBT** | **210 952** | **222 606** | **235 600** | **244 585** | **252 021** | **258 149** | **265 195** |
| &nbsp;&nbsp;&nbsp;***% of GDP*** | ***41.8*** | ***40.2*** | ***41.5*** | ***41.5*** | ***41.2*** | ***40.8*** | ***40.6*** |

---

(1) A positive entry represents a net liability while a negative
entry represents a net asset.

The Québec <br> Government's Debt I.13

**Withdrawals from the Retirement Plans Sinking Fund<br> as of 2024-2025**

The government contributes to its employees' pension plans, which are mainly cost-shared plans (50-50). Each year, for active employees, the government charges itself an expense (included in the budgetary balance) and a liability (included in the gross debt). For these employees, no money is disbursed, as disbursements are not made until after the employee retires.

These disbursements, which are for retired employees, currently result in a funding requirement, which is reflected in an increase in the financial markets debt, and an equivalent decrease in the liability for retirement plans (no impact on the gross debt).

In 1993, the government established the Retirement Plans Sinking Fund (RPSF) and has been accumulating sums in this fund since then to provide for retirement benefits. As at March 31, 2022, the RPSF was equal to 87% of the actuarial obligations in respect of retirement plans. It is anticipated that the RPSF will exceed 100% of the obligations in 2026.

In this context, the government is announcing that it will begin withdrawing sums from the RPSF to provide for the payment of pension benefits to government employees. An initial withdrawal of $1 billion will take place in 2024-2025. These withdrawals, which will help reduce the financing program, will gradually increase thereafter. They are presented in the financing program.

The use of the RPSF to pay retirement benefits will reduce the government's borrowing needs and its debt on financial markets. However, it will have no effect on the gross debt.

**Illustration of the impact on the government's gross debt of a $1-billion**

**withdrawal from the RPSF in 2024-2025 to pay for retirement benefits**

---

| | | | |
|:---|:---|:---|:---|
| (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) |
|  | **Gross debt as at March 31, 2025, <u>prior to</u> the<br> $1-billion withdrawal from <br> the RPSF** | **Gross debt as at March 31, 2025, <u>after</u> the<br> $1-billion withdrawal from <br> the RPSF** | **Change** |
| (A) Direct debt | 263 871 | 262 871 | -1 000 |
| &nbsp;&nbsp;&nbsp;&nbsp;Liability for retirement plans and other future benefits | 128 065 | 128 065 |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Less: RPSF and other funds | -128 411 | -127 411 | 1 000 |
| (B) Net liability for retirement plans and other future benefits | –346 | 654 | 1 000 |
| (C) Generations Fund | -18 940 | -18 940 |  |
| **(D) Gross debt (D = A + B + C)** | **244 585** | **244 585** | **—** |

---

Budget 2023-2024 <br> I.14 Budget Plan

![](ex99-19_001.jpg)

**The proportion of revenue dedicated to debt service is increasing,<br> but remains at historically low levels**

Debt service as a proportion of revenue is expected to rise slightly in future years as interest rates increase. It is projected to stand at 6.6% in 2027-2028, compared to 6.2% in 2021-2022 and over 10% during the early 2010s.

**Debt service**

(percentage of revenue)

![](ex99-19_003.jpg)

**Sensitivity of debt service to a rise in interest rates**

 ****

The high level of debt requires prudence and sound management of public finances, because a greater-than-anticipated rise in long-term interest rates would have a substantial impact on the financial framework.

A greater-than-anticipated rise in interest rates of 1 percentage point over a full year would increase interest expenditure by $522 million in the first year and nearly $1.9 billion in the fifth year.

The impact is increasing, as only a portion of the debt is refinanced each year. The average maturity of the debt was 11 years as at March 31, 2022.

Such a rise in interest rates starting in 2023-2024 would put the proportion of revenue dedicated to debt service at 7.8% in 2027-2028, as against the currently anticipated ratio of 6.6%.

**Impact on interest expenditure of a 1-percentage-point rise in interest rates**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) |
|  | **1st year** | **2nd year** | **3rd year** | **4th year** | **5th year** |
| Impact | 522 | 920 | 1 275 | 1 578 | 1 879 |

---

The Québec <br> Government's Debt I.15

TABLE I.5

**Factors responsible for the change in the Québec government's gross debt**

---

| | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) |
|  | **Debt, beginning<br> of year** | **Budgetary deficit<br> (surplus)** | **Investments, loans and advances** | **Net capital<br> investments<sup>(1)</sup>** | **Other factors<sup>(2)</sup>** | **Deposits<br> in the Generations<br> Fund** | **Total change** | **Debt,<br> end of<br> year** | ***% of<br> GDP*** |
| 2018-2019 | 201 071 | -4 413 | –250 | 3 002 | 3 165 | -3 477 | -1 973 | 199 098 | *45.3* |
| 2019-2020 | 199 098 | 523 | 402 | 3 737 | -1 224 | -2 606 | 832 | 199 930 | *43.5* |
| 2020-2021 | 199 930 | 7 539 | 6 352 | 4 351 | -3 631 | -3 313 | 11 298 | 211 228 | *46.8* |
| 2021-2022 | 211 228 | 772 | 4 135 | 5 080 | -6 646 | -3 617 | –276 | 210 952 | *41.8* |
| 2022-2023 | 210 952 | 5 021 | -2 275 | 5 417 | 6 842 | -3 351 | 11 654 | 222 606 | *40.2* |
| 2023-2024 | 222 606 | 3 998 | 4 973 | 5 974 | 422 | -2 373 | 12 994 | 235 600 | *41.5* |
| 2024-2025 | 235 600 | 2 984 | 3 393 | 6 045 | -1 050 | -2 387 | 8 985 | 244 585 | *41.5* |
| 2025-2026 | 244 585 | 1 980 | 2 041 | 5 974 | –35 | -2 524 | 7 436 | 252 021 | *41.2* |
| 2026-2027 | 252 021 | 976 | 2 313 | 5 830 | -284 | -2 707 | 6 128 | 258 149 | *40.8* |
| 2027-2028 | 258 149 | –9 | 1 564 | 5 687 | 2 637 | -2 833 | 7 046 | 265 195 | *40.6* |

---

(1) Investments made under public-private partnership agreements
are included in net capital investments.

(2) Other factors include, in particular, the change in other accounts,
such as accounts receivable and accounts payable. The decrease in debt for other factors in 2021-2022 and an increase in 2022-2023
are due in part to the one-time cost of living amount of $500 per adult announced in the March 2022 budget. This measure resulted
in an expenditure in 2021-2022, but an outflow in early 2022-2023.

Budget 2023-2024 <br> I.16 Budget Plan

![](ex99-19_001.jpg)

**Net capital investments**

Net capital investments consist of the government's gross investments minus depreciation expenses.

Even though gross investments have an impact on gross debt, net capital investments are presented in the factors responsible for the change in the gross debt due to the fact that depreciation expenses are included in the budgetary balance.

From 2023-2024 to 2027-2028, net capital investments will increase gross debt by $5.9 billion per year on average.

**Net capital investments**

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) |
|  | **2022-<br> 2023** | **2023-<br> 2024** | **2024-<br> 2025** | **2025-<br> 2026** | **2026-<br> 2027** | **2027-<br> 2028** |
| Gross investments<sup>(1)</sup> | 10 291 | 10 731 | 11 080 | 11 268 | 11 402 | 11 567 |
| Less: Depreciation | -4 874 | -4 757 | -5 035 | -5 294 | -5 572 | -5 880 |
| **Net capital investments** | **5 417** | **5 974** | **6 045** | **5 974** | **5 830** | **5 687** |

---

(1) These investments exclude the Québec government's
contribution to the projects of partners (e.g., municipalities), whereas this contribution is included in the annual investments
of the Québec Infrastructure Plan and portfolio expenditures.

**Investments, loans and advances**

Investments, loans and advances refer to investments made by the government in enterprises, mainly government enterprises.

A government enterprise may be authorized to keep part of its net earnings.

For example, every year, Hydro-Québec pays the government a dividend corresponding to 75% of its net earnings. Hydro-Québec uses the portion of net earnings not paid to the government (25%) to finance its requirements.

– For the government, this constitutes an investment that creates a financial requirement and thus an increase in gross debt.

Note that investments, loans and advances may vary from one year to another, particularly because of temporary investments made and redeemed.

The Québec <br> Government's Debt I.7

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.4 Net debt

Net debt corresponds to the government's liabilities minus its financial assets. Several other provinces use this concept to present the change in their debt.

As at March 31, 2023, Québec's net debt will stand at $206.8 billion, or 37.4% of GDP. A decrease to 35.8% of GDP is expected by 2027-2028.

The return to a balanced budget, deposits in the Generations Fund and the growth of the economy will contribute to reducing the net debt.

TABLE I. 6 <br>**Factors responsible for the change in net debt** 

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) |
|  | **Debt,<br> beginning<br> of year** | **Budgetary deficit (surplus)** | **Net capital<br> investments** | **Other<sup>(1)</sup>** | **Deposits<br> in the Generations Fund** | **Total change** | **Debt,<br> end of year** | ***% of GDP*** |
| 2018-2019 | 188 130 | -4 413 | 3 002 | 1 293 | -3 477 | -3 595 | 184 535 | *42.0* |
| 2019-2020 | 184 535 | 523 | 3 737 | -2 372 | -2 606 | –718 | 183 817 | *40.0* |
| 2020-2021 | 183 817 | 7 539 | 4 351 | -2 149 | -3 313 | 6 428 | 190 245 | *42.2* |
| 2021-2022 | 190 245 | 772 | 5 080 | –272 | -3 617 | 1 963 | 192 208 | *38.1* |
| 2022-2023 | 199 758<sup>(2)</sup> | 5 021 | 5 417 |  | -3 351 | 7 087 | 206 845 | *37.4* |
| 2023-2024 | 206 845 | 3 998 | 5 974 |  | -2 373 | 7 599 | 214 444 | *37.7* |
| 2024-2025 | 214 444 | 2 984 | 6 045 |  | -2 387 | 6 642 | 221 086 | *37.5* |
| 2025-2026 | 221 086 | 1 980 | 5 974 |  | -2 524 | 5 430 | 226 516 | *37.0* |
| 2026-2027 | 226 516 | 976 | 5 830 |  | -2 707 | 4 099 | 230 615 | *36.5* |
| 2027-2028 | 230 615 | –9 | 5 687 |  | -2 833 | 2 845 | 233 460 | *35.8* |

---

(1) These changes in net debt are mainly due to other comprehensive
income of government enterprises. These other items are excluded from the government's annual results and are recorded directly
in the accumulated deficit. This factor also includes the change in inventories.

(2) A new liability for asset retirement obligations will have
to be recorded in the government's financial statements for the first time as at March 31, 2023. As at April 1, 2022,
this liability is estimated at $7.6 billion. It increases net debt by the same amount.

Budget 2023-2024 <br> I.18 Budget Plan

![](ex99-19_001.jpg)

**Recognition of asset retirement obligations:<br> an estimated increase in net debt of $7.6 billion**

**Asset retirement obligations**

A new accounting standard on the recognition of asset retirement obligations came into effect on April 1, 2022 for all Canadian provinces and territories.

This standard requires the recognition of a liability when a government has a legal obligation to perform specific activities upon retirement of a capital asset.

For Québec, the main obligation in this regard relates to asbestos in buildings and roads. Applicable laws and regulations require Québec to implement specific measures to ensure the safe handling and disposal of materials containing asbestos when working on, for example, a capital asset.

This new liability is estimated at $7.6 billion as at April 1, 2022. It will have an equivalent impact on net debt and an estimated impact of $6.5 billion on the debt representing accumulated deficits,<sup>1</sup> but not on gross debt.

**Financial instruments**

New standards establishing a framework for the recognition and presentation of financial instruments also came into effect on April 1, 2022. These standards will have an impact on the government's debt as, for example, derivative financial instruments will now have to be measured at fair value. Temporary changes in the debt are expected. The annual impact of these changes will be reported in the new statement of remeasurement gains and losses.

The revised impact of these new standards and the presentation of the new financial statement will be included in the public accounts for the fiscal year ending March 31, 2023.

<sup>1</sup> The differential impact is due to the fact that the standard will have an upward effect on capital investments.

The Québec <br> Government's Debt I.19

☐ The net debt is lower than it was before the pandemic

The net debt burden will be 37.4% of GDP as at March 31, 2023. This is lower than the pre-pandemic level of 40.0% of GDP as at March 31, 2020.

The net debt-to-GDP ratio is expected to decline gradually starting in 2024-2025.

---

| |
|:---|
| CHART I. 2<br>**Net debt as at March 31**  |
| (percentage of GDP) |
| &nbsp;&nbsp; ![](ex99-19_004.jpg) |

---

Budget 2023-2024 <br> I.20 Budget Plan

![](ex99-19_001.jpg)

☐ Comparison of the net debt of governments in Canada

As at March 31, 2022, Québec's net debt burden stood at 38.1% of GDP, compared with the provincial average of 31.3%.

---

| |
|:---|
| CHART I. 3 <br>**Net debt of governments in Canada as at March 31, 2022** |
| (percentage of GDP) |
| ![](ex99-19_005.jpg) |

---

(1) This average is obtained by dividing the sum of provincial
debts by the sum of provincial GDP.

Sources: Public accounts and Statistics Canada. <br>

The Québec <br> Government's Debt I.21

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1.5 Debt representing accumulated deficits

Debt representing accumulated deficits consists of accumulated deficits figuring in the government's financial statements. It is the debt that does not correspond to any assets. The federal government uses this concept to present the change in its debt.

As at March 31, 2023, the debt representing Québec's accumulated deficits will stand at $113.3 billion, or 20.5% of GDP.

The debt burden representing accumulated deficits is expected to decline to 16.9% of GDP as at March 31, 2028.

TABLE I.7

**Factors responsible for the change in debt representing accumulated deficits**

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) |
|  | **Debt,<br> beginning<br> of year** | **Budgetary<br> deficit<br> (surplus)** | **Accounting<br> adjustments<sup>(1)</sup>** | **Deposits<br> in the<br> Generations<br> Fund** | **Total<br> change** | **Debt, end<br> of year** | ***% of<br> GDP*** |
| 2018-2019 | 119 057 | -4 413 | 1 258 | -3 477 | -6 632 | 112 425 | *25.6* |
| 2019-2020 | 112 425 | 523 | -2 632 | -2 606 | -4 715 | 107 710 | *23.4* |
| 2020-2021 | 107 710 | 7 539 | -3 208 | -3 313 | 1 018 | 108 728 | *24.1* |
| 2021-2022 | 108 728 | 772 | -691 | -3 617 | -3 536 | 105 192 | *20.9* |
| 2022-2023 | 111 642<sup>(2)</sup> | 5 021 |  | -3 351 | 1 670 | 113 312 | *20.5* |
| 2023-2024 | 113 312 | 3 998 |  | -2 373 | 1 625 | 114 937 | *20.2* |
| 2024-2025 | 114 937 | 2 984 |  | -2 387 | 597 | 115 534 | *19.6* |
| 2025-2026 | 115 534 | 1 980 |  | -2 524 | -544 | 114 990 | *18.8* |
| 2026-2027 | 114 990 | 976 |  | -2 707 | -1 731 | 113 259 | *17.9* |
| 2027-2028 | 113 259 | –9 |  | -2 833 | -2 842 | 110 417 | *16.9* |

---

(1) These changes in the debt representing accumulated deficits
are due to other comprehensive income of government enterprises. These other items are excluded from the government's annual results
and are recorded directly in the accumulated deficit.

(2) A new liability for asset retirement obligations will have to
be recorded in the government's financial statements as at March 31, 2023. As at April 1, 2022, the impact
of this liability on the debt representing accumulated deficits is estimated at $6.5 billion.

Budget 2023-2024 <br> I.22 Budget Plan

![](ex99-19_001.jpg)

**Québec's public sector debt**

The public sector debt includes the government's gross debt as well as the debt of Hydro-Québec, the municipalities, universities other than the Université du Québec and its constituents, and other government enterprises. This debt has served, in particular, to fund public infrastructure, such as roads, schools, hospitals, hydroelectric dams, and water treatment plants.

As at March 31, 2023, Québec's public sector debt will stand at $304.6 billion, or 55.0% of GDP. These figures must, however, be seen in perspective, for they do not take into account the economic value of certain assets held by the government, such as Hydro-Québec, the Société des alcools du Québec and Loto-Québec.

**Public sector debt as at March 31**

---

| | | | | |
|:---|:---|:---|:---|:---|
| (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) |
|  | **2020** | **2021** | **2022** | **2023** |
| Government's gross debt | 199 930 | 211 228 | 210 952 | 222 606 |
| Hydro-Québec | 43 839 | 44 955 | 46 225 | 49 881 |
| Municipalities | 29 424 | 30 020 | 31 263 | 30 753 |
| Universities other than the Université du Québec and its constituents | 1 639 | 1 452 | 1 379 | 1 379 |
| **PUBLIC SECTOR DEBT** | **274 832** | **287 655** | **289 819** | **304 619** |
| &nbsp;&nbsp;&nbsp;***% of GDP*** | ***59.8*** | ***63.8*** | ***57.5*** | ***55.0*** |

---

The Québec <br> Government's Debt I.23

![](ex99-19_001.jpg)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Financing

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.1 Financing program

The financing program corresponds to long-term borrowings contracted during the fiscal year. The program is used to, among other things, repay maturing borrowings and to meet net financial requirements, which include the government's capital investments and the budgetary deficit.

For 2022-2023, the program stands at $24.2 billion, which is $3.5 billion less than projected in the March 2022 budget.

The decrease is mainly due to a reduction in net financial requirements and an increase in the outstanding amount of Québec Treasury bills. However, the decrease is partially offset by an increase in the repayment of borrowings.

As at March 1, 2023, the government had completed its financing program.

TABLE I. 8

**Government's financing program in 2022-2023**

---

| | | | |
|:---|:---|:---|:---|
| (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) |
|  | **March 2022** | **Adjustments** | **March 2023** |
| Net financial requirements | 19 096 | -6 393 | 12 703 |
| Repayments of borrowings | 14 444 | 4 562 | 19 006 |
| Use of the Generations Fund to repay borrowings |  |  |  |
| Withdrawal from the Accumulated Sick Leave Fund |  | -155 | -155 |
| Use of pre-financing | -5 925 | -1 222 | -7 147 |
| Change in cash position |  | 713 | 713 |
| Transactions under the credit policy<sup>(1)</sup> |  | 1 047 | 1 047 |
| Pre-financing |  |  |  |
| Increase in the outstanding amount of Québec Treasury bills |  | -2 000 | -2 000 |
| **TOTAL** | **27 615** | **-3 448** | **24 167** **<sup>(2)</sup>** |

---

Note: A negative entry indicates a source of financing and a positive entry, a financial requirement.

(1) The credit policy is designed to limit financial risk with respect
to counterparties. Under this policy, the government disburses or receives sums that fluctuate with the market value of the contracts.
The amounts transacted do not affect the debt.

(2) Borrowings contracted as at March 1, 2023.

The Québec <br> Government's Debt I.25

The financing program will amount to $29.5 billion in 2023-2024.

For the four subsequent years, from 2024-2025 to 2027-2028, it will average $26.4 billion per year.

TABLE I.9

**Government's financing program from 2023-2024 to 2027-2028** 

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) | (millions of dollars) |
|  | **2023-<br> 2024** | **2024-<br> 2025** | **2025-<br> 2026** | **2026-<br> 2027** | **2027-<br> 2028** |
| Net financial requirements | 18 647 | 15 671 | 14 899 | 14 101 | 15 227 |
| Repayments of borrowings | 13 396 | 16 477 | 16 630 | 13 666 | 12 915 |
| Use of pre-financing |  |  |  |  |  |
| Use of the Generations Fund to repay borrowings | -2 500 | -2 500 |  |  |  |
| Retirement Plans Sinking Fund withdrawals |  | -1 000 | -2 500 | -3 500 | -4 500 |
| **TOTAL** | **29 543** | **28 648** | **29 029** | **24 267** | **23 642** |

---

Note: A negative entry indicates a source of financing and a positive entry, a financial requirement.

Budget 2023-2024 <br> I.26 Budget Plan

![](ex99-19_001.jpg)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.2 Borrowings contracted in 2022-2023

The government aims to borrow at the lowest possible cost. To that end, it applies a strategy for diversifying sources of funding by market, financial instrument and maturity.

Thus far in 2022-2023, the government has contracted 19% of its borrowings on foreign markets, compared to an average of 27% over the last 10 years. Québec plans to continue to take advantage of opportunities to issue on foreign markets. However, the government keeps no exposure of its debt to foreign currencies in order to neutralize the effects of their fluctuations on debt service.

In 2022-2023, conventional bonds in Canadian dollars were the main debt instrument used.

The average cost of transactions in 2022-2023 was 3.80% with an average maturity of borrowings of 17 years, while the cost of the entire debt was 3.06% with an average remaining maturity of 11 years as at March 31, 2022.

TABLE I. 10

**Summary of long-term borrowings contracted in 2022-2023**

---

| | | |
|:---|:---|:---|
| **Currencies** | **$million** | **%** |
| **CANADIAN DOLLAR** | | |
| &nbsp;&nbsp;&nbsp;Conventional bonds | 16 517 | 68.5 |
| &nbsp;&nbsp;&nbsp;Green bonds | 1 799 | 7.4 |
| &nbsp;&nbsp;&nbsp;Savings products issued by Épargne Placements Québec | 1 090 | 4.5 |
| &nbsp;&nbsp;&nbsp;Immigrant investors<sup>(1)</sup> | 275 | 1.1 |
| &nbsp;&nbsp;&nbsp;**Subtotal** | **19 681** | **81.5** |
| **OTHER CURRENCIES** |  |  |
| &nbsp;&nbsp;&nbsp;Euro | 3 241 | 13.4 |
| &nbsp;&nbsp;&nbsp;Pound sterling | 1 189 | 4.9 |
| &nbsp;&nbsp;&nbsp;Australian dollar | 56 | 0.2 |
| &nbsp;&nbsp;&nbsp;**Subtotal** | **4 486** | **18.5** |
| **TOTAL** | **24 167** | **100.0** |

---

Note: Borrowings contracted as at March 1, 2023.

(1) These borrowings are from sums advanced by immigrant investors.
These sums are lent to the government through Investissement Québec.

The Québec <br> Government's Debt I.27

**Green Bond program**

In 2017, the government introduced a Green Bond program to fund projects providing tangible benefits with regard to protecting the environment, reducing greenhouse gas (GHG) emissions or adapting to climate change. Through this program, the government is contributing to, among other things, the development of a socially responsible investment market.

The program draws on the Green Bond Principles, a set of guidelines created to bring more transparency to the issuance, disclosure and reporting process.

The Québec Green Bond program's framework, which was updated in July 2022, received the highest rating possible from CICERO (Center for International Climate Research).

Eight issues totalling $5.1 billion have been made since the program was launched, including two issues totalling $1.8 billion in May and November 2022. Given the demand for Québec's Green Bonds and the government's commitment to the environment, Québec has pledged to be a regular issuer of Green Bonds.

For more information, visit http://www.finances.gouv.qc.ca/department/environment_green_economy/green_bonds/.

Budget 2023-2024 <br> I.28 Budget Plan

![](ex99-19_001.jpg)

**Funding of public bodies**

The main mission of the Financing Fund and Financement-Québec is to offer Québec's public sector bodies financing at the lowest possible cost. The clientele of the Financing Fund consists of public bodies included in the government reporting entity. In fiscal 2022-2023, the Financing Fund's long-term loan program amounts to nearly $10.5 billion, and that of Financement-Québec, to $1.2 billion.

---

| | |
|:---|:---|
| **Financing Fund's long-term**<br> **loan program in 2022-2023** | **Financement-Québec's long-term**<br> **loan program in 2022-2023**  |
| ![](ex99-19_006.jpg) | ![](ex99-19_007.jpg) |
|  | (1) Montreal Museum of Fine Arts.<br> (2) Municipal transit authorities. |

---

As a result of the change in the application of the accounting standard respecting transfer payments, the government has decided to modify the terms and conditions for the payment of grants related to infrastructure projects. Grants related to subsidized investments will now be paid in cash as repayment of temporary loans contracted with the Financing Fund or Financement-Québec rather than as repayment of debt service on long-term loans.

This change in payment terms is implemented gradually. As of 2022-2023, the Ministère de la Santé et des Services sociaux and the Ministère du Tourisme have started making cash payments. As such, no new long-term loans are planned in connection with these grants.

Long-term financing from the Financing Fund and Financement-Québec will remain for non-subsidized investments.

Essentially, the government continues to finance its infrastructure through long-term borrowing on the financial markets regardless of whether it chooses to finance the grant recipient entity on a long-term basis or to pay cash for its grant.

The Québec <br> Government's Debt I.29

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.3 Debt management strategy

The government's debt management strategy aims to minimize financing costs while taking into consideration the risks associated with fluctuations in exchange and interest rates.

The government uses a range of financial instruments, particularly interest rate and currency swap agreements (swaps), to achieve desired debt proportions by currency and interest rate.

☐ Structure of debt by currency

As at March 31, 2023, before taking swaps into account, 77% of the debt is expected to be in Canadian dollars, 12% in euros, 8% in U.S. dollars, 1% in pounds sterling, 1% in Australian dollars, 1% in Swiss francs and less than 1% in other foreign currencies (yen, New Zealand dollars and Swedish krona).

After taking swaps into account, the entire debt is denominated in Canadian dollars.

Since 2012-2013, the government has maintained no exposure of its debt to foreign currencies.

The contracted swaps neutralize exposure to foreign currency fluctuations on debt service.

TABLE I. 11

**Structure of debt by currency as at March 31, 2023**

---

| | | |
|:---|:---|:---|
| (per cent) | (per cent) | (per cent) |
|  | **Before swaps** | **After swaps** |
| Canadian dollar | 77 | 100 |
| Euro | 12 | 0 |
| U.S. dollar | 8 | 0 |
| Pound sterling | 1 | 0 |
| Australian dollar | 1 | 0 |
| Swiss franc | 1 | 0 |
| Other (yen, New Zealand dollar and Swedish krona) | 0<sup>(1)</sup> | 0 |
| **TOTAL** | **100** | **100** |

---

Note: This is the debt issued on financial markets by the government and Financement-Québec, minus the balance of the Sinking Fund for Government Borrowing.

(1) The proportion of debt attributable to other currencies before
swaps is less than 1%.

Budget 2023-2024 <br> I.30 Budget Plan

![](ex99-19_001.jpg)

☐ Structure of debt by interest rate

The government keeps part of its debt at fixed interest rates and part at floating interest rates.

As at March 31, 2023, after taking swaps into account, the proportion of debt at fixed interest rates<sup>8</sup> is expected to be 88.5%, and the proportion at floating interest rates is expected to be 11.5%.

Moreover, as at March 31, 2023, the share of debt subject to an interest rate change in 2023-2024 is expected to stand at 16.0%. This share includes debt at floating interest rates (11.5%) as well as debt at fixed rates to be refinanced in 2023-2024 (4.5%).

---

| |
|:---|
| CHART I.4<br>**Structure of debt by interest rate as at March 31, 2023** |
| ![](ex99-19_008.jpg) |

---

Note: This is the debt issued on financial markets by the government and Financement-Québec, minus the balance of the Sinking Fund for Government Borrowing.

<sup>8</sup> This proportion includes debt at fixed interest rates maturing in more than one year (84.0%) as well as debt at fixed interest rates to be refinanced in 2023-2024 (4.5%).

The Québec <br> Government's Debt I.31

☐ Debt maturity

Maturities of new borrowings are distributed over time so as to stabilize the refinancing profile and ensure the government's regular presence on capital markets. To date, approximately 90% of the borrowings contracted in 2022-2023 had a maturity of 10 years or more. The average share of issues for this term over the last 10 years represents 73%. The average maturity of borrowings is 17 years in 2022-2023.

---

| |
|:---|
| CHART I.5<br>**Maturity of transactions carried out in 2022-2023** |
| ![](ex99-19_009.jpg) |

---

The diversification of borrowings by term is reflected on the maturity of the debt as shown in the following chart. As at March 31, 2023, the average maturity of the debt is expected to be 12 years.

---

| |
|:---|
| CHART I.6<br>**Maturity of long-term debt as at March 31, 2023** |
| (millions of dollars) |
| ![](ex99-19_010.jpg) |

---

Note: This is the debt issued on financial markets by the government and Financement-Québec, minus the balance of the Sinking Fund for Government Borrowing.

Budget 2023-2024 <br> I.32 Budget Plan

![](ex99-19_001.jpg)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2.4 Yield on Québec's debt securities

The recent interest rate hike brings the yield of Treasury bills to 4.6%, while the yield on 10-year Québec government securities is 4.1% after reaching a low of 1.2% in July 2020.

---

| |
|:---|
| CHART I.7<br>**Yield on the Québec government's securities** |
| (per cent) |
| ![](ex99-19_011.jpg) |

---

Sources: PC-Bond and Ministère des Finances du Québec.

Since June 2017, a spread in favour of Québec has been observed between the yield on 10-year securities of Québec and those of Ontario. This spread now stands at about 2 basis points.

---

| |
|:---|
| CHART I.8<br>**Yield spread on long-term (10-year) securities** |
| (percentage points) |
| ![](ex99-19_012.jpg) |

---

Source: PC-Bond.

The Québec <br> Government's Debt I.33

![](ex99-19_001.jpg)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. Information on retirement plans and funds deposited by the Ministère des Finances with the Caisse de
 dépôt et placement du Québec

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.1 Net liability for retirement plans

The Québec government covers its share of the funding of its employees' retirement plans, which are defined-benefit plans.

In its financial statements, it discloses the pension obligation, which corresponds to the present value of the retirement benefits that it will pay to its employees. This obligation is re-evaluated annually using a method that gradually factors in differences observed relative to forecasts.<sup>9</sup> The result is the retirement plans liability.

Sums are accumulated in the Retirement Plans Sinking Fund (RPSF) and other funds to pay retirement benefits. The value of these assets is subtracted from the liability to measure the government's net commitment, called the net retirement plans liability. This amount is included in gross debt.

As at March 31, 2022, net liability for retirement plans and other employee future benefits stood at $9.5 billion.

TABLE I.12

**Net liability for retirement plans and other employee future benefits as at March 31, 2022**

---

| | |
|:---|:---|
| (millions of dollars) | (millions of dollars) |
| **Retirement plans** |  |
| &nbsp;&nbsp;&nbsp;Retirement plans liability<sup>(1)</sup> | 116 569 |
| &nbsp;&nbsp;&nbsp;Less: Retirement Plans Sinking Fund (RPSF) and other funds<sup>(2)</sup> | -106 963 |
| &nbsp;&nbsp;&nbsp;**Net retirement plans liability** | **9 606** |
| **Other employee future benefits** |  |
| &nbsp;&nbsp;&nbsp;Other employee future benefits liability | 1 416 |
| &nbsp;&nbsp;&nbsp;Less: Funds dedicated to other employee future benefits | -1 565 |
| &nbsp;&nbsp;&nbsp;**Net other employee future benefits asset** | **–149** |
| **NET LIABILITY FOR RETIREMENT PLANS AND OTHER EMPLOYEE FUTURE BENEFITS** | **9 457** |

---

(1) Mainly the Government and Public Employees Retirement Plan (RREGOP)
and the Pension Plan of Management Personnel (PPMP).

(2) The value of the RPSF is $100.4 billion. The other funds
consist mainly of that of the Pension Plan of the Université du Québec. For the RPSF, this is the book value. For
information purposes, as at December 31, 2022, the book value of the RPSF was $107.5 billion.

<sup>9</sup> The value of obligations relating to accrued retirement plan benefits undergoes actuarial valuations every three years. The value is extrapolated between two valuations.

The Québec <br> Government's Debt I.35

**The Retirement Plans Sinking Fund in proportion to actuarial obligations**

In December 1999, as part of the agreement concluded for the renewal of its employees' collective agreements, the government set the objective of ensuring that the book value of the sums accumulated in the RPSF would be equal, in 2020, to 70% of its actuarial obligations in respect of the retirement plans of public and parapublic sector employees.

– The objective was reached as at March 31, 2018, that is, two years sooner than anticipated.

As at March 31, 2022, the RPSF was equal to 87% of the actuarial obligations in respect of retirement plans.

It is expected that the sums accumulated in the RPSF to pay the retirement benefits of government employees will exceed the government's retirement plans liability in 2026. In this context, the government is announcing that it will begin withdrawing sums from the RPSF to provide for the payment of pension benefits to government employees. An initial withdrawal of $1 billion will take place in 2024-2025. These withdrawals will help reduce the financing program and Québec's debt on financial markets.

---

| |
|:---|
| **Book value of the RPSF in proportion to the government's actuarial obligations in respect of the retirement plans of public and parapublic sector employees as at March 31** |
| (per cent) |
| ![](ex99-19_013.jpg) |

---

Budget 2023-2024 <br> I.36 Budget Plan

![](ex99-19_001.jpg)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3.2 Returns on funds deposited with the Caisse de dépôt et placement du Québec

The main funds deposited by the Ministère des Finances with the Caisse de dépôt et placement du Québec (RPSF, Generations Fund and Accumulated Sick Leave Fund) are managed in accordance with investment policies established by the Ministère des Finances in cooperation with representatives of the Caisse.

These investment policies are established based on several factors, including 10-year return forecasts, standard deviations and correlations for various categories of assets, opportunities for investing in these assets and recommendations of the Caisse.

In 2022, the return on funds deposited by the Ministère des Finances with the Caisse was -4.6% for the RPSF, -7.9% for the Generations Fund and -4.6% for the Accumulated Sick Leave Fund.

— The year 2022 was a challenging one for both stocks and bonds. In this difficult environment, the Caisse managed to outperform its benchmark portfolio.

— The lower return for the Generations Fund is due to differences in investment policies. The Generations Fund, by its very nature, holds more liquid investments such as stocks and bonds.

The investment policies of these three funds are presented on the next page.

TABLE I.13

**2022 return on and market value of funds deposited by the Ministère des Finances with the Caisse de dépôt et placement du Québec**

---

| | | |
|:---|:---|:---|
| | **Rate of return**<br>(%) | **Market value as at<br> December 31, 2022**<br>($billion) |
| Retirement Plans Sinking Fund (RPSF) | –4.6 | 107.5 |
| Generations Fund | –7.9 | 17.8 |
| Accumulated Sick Leave Fund | –4.6 | 1.2 |

---

The Québec <br> Government's Debt I.37

☐ Comparison of investment policies

TABLE I.14

**Investment policies as at January 1, 2023**

---

| | | | |
|:---|:---|:---|:---|
| (per cent) | (per cent) | (per cent) | (per cent) |
| **Specialized portfolios** | **RPSF and ASLF** | **Generations Fund** | **Average benchmark<br> portfolio of<br> depositors as a<br> whole<sup>(1)</sup>** |
| &nbsp;&nbsp;&nbsp;Short-Term Investments | 1 | 1 | 1.3 |
| &nbsp;&nbsp;&nbsp;Rates<sup>(2)</sup> | 9.5 | 10 | 11 |
| &nbsp;&nbsp;&nbsp;Credit<sup>(3)</sup> | 22.5 | 28 | 19.7 |
| **Total – Fixed Income** | **33.0** | **39.0** | **32.0** |
| &nbsp;&nbsp;&nbsp;Infrastructure | 12 | 8 | 9.7 |
| &nbsp;&nbsp;&nbsp;Real Estate | 11.5 | 8 | 12.2 |
| **Total – Real Assets** | **23.5** | **16.0** | **21.9** |
| &nbsp;&nbsp;&nbsp;Equity Markets | 27.5 | 36 | 31.1 |
| &nbsp;&nbsp;&nbsp;Private Equity | 16 | 9 | 15.3 |
| **Total – Equities** | **43.5** | **45.0** | **46.4** |
| **Leverage Product** | **—** | **—** | **–0.3** |
| **TOTAL** | **100.0** | **100.0** | **100.0** |

---

RPSF: Retirement Plans Sinking Fund.

ASLF: Accumulated Sick Leave Fund.

(1) Data as at December 31, 2021, drawn from the *2021 Annual Report* of the Caisse de dépôt et placement du Québec.

(2) This portfolio consists of government bonds.

(3) Broader range of instruments with fixed income securities characteristics.

Budget 2023-2024 <br> I.38 Budget Plan

![](ex99-19_001.jpg)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. Credit ratings

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.1 Québec's credit ratings

A credit rating measures the ability of a borrower, such as the Québec government, to pay interest on its debt and repay the principal at maturity.

A high credit rating means access to a broader pool of investors and advantageous borrowing costs.

Québec's credit rating is evaluated by six credit rating agencies.

In July 2022, Japan Credit Rating Agency (JCR) raised Québec's credit rating from AA+ to AAA, the highest possible rating. This is the highest rating that the agency has ever given to Québec. According to the Japanese agency, the strength of Québec's economy has allowed for a strong recovery and a lowering of the debt burden from the pre-pandemic level.

The five other agencies that rate Québec confirmed its credit rating, with a stable outlook.

Overall, the credit rating agencies emphasized that Québec had a strong and diversified economy, and that the government's commitment to returning to a balanced budget demonstrated sound management of public finances. The agencies also noted that the government's commitment to reducing the debt burden was a positive element.

TABLE I.15

**Québec's credit ratings**

---

| | | |
|:---|:---|:---|
| **Credit rating agency** | **Credit rating** | **Outlook** |
| Standard & Poor's (S&P) | AA- | Stable |
| Moody's | Aa2 | Stable |
| Fitch Ratings | AA- | Stable |
| DBRS Morningstar | AA (low) | Stable |
| Japan Credit Rating Agency (JCR) | AAA | Stable |
| China Chengxin International (CCXI)<sup>(1)</sup> | AAA | Stable |

---

Note: Québec's credit ratings as at March 1, 2023.

(1) Credit rating for bond issues on the Chinese market.

The Québec <br> Government's Debt I.39

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4.2 Comparison of the credit ratings of Canadian provinces

The following charts show the credit ratings of Canadian provinces by Standard & Poor's and Moody's.

---

| |
|:---|
| CHART I.9<br>**Credit ratings of Canadian provinces – Standard & Poor's** |
| ![](ex99-19_014.jpg) |

---

Note: Credit ratings as at March 1, 2023.

---

| |
|:---|
| CHART I.10<br>**Credit ratings of Canadian provinces – Moody's** |
| ![](ex99-19_015.jpg) |

---

Note: Credit ratings as at March 1, 2023.

(1) This province has a positive outlook.

Budget 2023-2024 <br> I.40 Budget Plan

## Exhibit 99.20

------

**Exhibit 99.20**

TABLE 1

**Québec government**

**Summary of budgetary transactions**

**Preliminary results for 2022-2023**

---

| | |
|:---|:---|
| (millions of dollars) | (millions of dollars) |
|  | **2022-2023** |
| **REVENUE** |  |
| Own-source revenue | 115 873 |
| Federal transfers | 29 226 |
| **Total** | **145 099** |
| **EXPENDITURE** |  |
| Portfolio expenditures | -136 716 |
| Debt service | -10 053 |
| **Total** | **-146 769** |
| **SURPLUS (DEFICIT)** | **-1 670** |
| ***BALANCED BUDGET ACT*** |  |
| Deposits of dedicated revenues in the Generations Fund | -3 351 |
| **BUDGETARY BALANCE BEFORE USE OF THE STABILIZATION RESERVE** | **-5 021** |
| Use of the stabilization reserve | 449 |
| **BUDGETARY BALANCE<sup>(1)</sup>** | **-4 572** |

---

(1) Budgetary balance within the meaning of the *Balanced Budget Act*, after use of the stabilization reserve.

TABLE 2

**Québec government**

**Summary of budgetary transactions**

**Forecasts for 2023-2024**

(millions of dollars)

---

| | |
|:---|:---|
| | **2023-2024** |
| **REVENUE** |  |
| Own-source revenue | 117 989 |
| Federal transfers | 29 742 |
| **Total** | **147 73**1** |
| **EXPENDITURE** |  |
| Portfolio expenditures | -138 392 |
| Debt service | -9 464 |
| **Total** | **-147 856** |
| Contingency reserve | -1 500 |
| **SURPLUS (DEFICIT)** | **-1 625** |
| ***BALANCED BUDGET ACT*** |  |
| Deposits of dedicated revenues in the Generations Fund | -2 373 |
| **BUDGETARY BALANCE<sup>(1)</sup>** | **-3 998** |

---

(1) Budgetary balance within the meaning of the *Balanced Budget Act*.

TABLE 3

**Québec government**

**Revenue**

**Forecasts for 2023-2024**

(millions of dollars)

---

| | |
|:---|:---|
| | **2023-2024** |
| **OWN-SOURCE REVENUE** | |
| Income and property taxes |  |
| &nbsp;&nbsp;&nbsp;Personal income tax | 43 126 |
| &nbsp;&nbsp;&nbsp;Contributions for health services | 7 944 |
| &nbsp;&nbsp;&nbsp;Corporate taxes | 13 192 |
| &nbsp;&nbsp;&nbsp;School property tax | 1 184 |
|  | **65 446** |
| Consumption taxes |  |
| &nbsp;&nbsp;&nbsp;Sales taxes<sup>(1)</sup> | 23 505 |
| &nbsp;&nbsp;&nbsp;Fuel | 2 081 |
| &nbsp;&nbsp;&nbsp;Tobacco products | 982 |
| &nbsp;&nbsp;&nbsp;Alcoholic beverages | 635 |
| &nbsp;&nbsp;&nbsp;Cannabis<sup>(2)</sup> | 87 |
|  | **27 290** |
| Revenue from government enterprises |  |
| &nbsp;&nbsp;&nbsp;Hydro-Québec | 3 525 |
| &nbsp;&nbsp;&nbsp;Loto-Québec | 1 498 |
| &nbsp;&nbsp;&nbsp;Société des alcools du Québec | 1 459 |
| &nbsp;&nbsp;&nbsp;Investissement Québec | 216 |
| &nbsp;&nbsp;&nbsp;Société québécoise du cannabis | 92 |
| &nbsp;&nbsp;&nbsp;Other | 17 |
|  | **6 807** |
| Duties and permits | 5 739 |
| Miscellaneous revenue | 12 707 |
| **TOTAL OWN-SOURCE REVENUE** | **117 989** |
| **FEDERAL TRANSFERS** |  |
| Equalization | 14 037 |
| Health transfers | 8 660 |
| Transfers for post-secondary education and other social programs | 1 366 |
| Other programs | 5 679 |
| **TOTAL FEDERAL TRANSFERS** | **29 742** |
| **TOTAL REVENUE** | **147 73**1** |

---

(1) Sales taxes, within the meaning of the Public Accounts, include,
in particular, the QST, the tax on insurance premiums, the tax on lodging and the specific duty on new tires. They also include, for
presentation purposes, revenue from pari-mutuel.

(2) This is Québec's component of the excise duty on
cannabis sales.

TABLE 4

**Québec government**

**Expenditure**

**Forecasts for 2023-2024**

(millions of dollars)

---

| | |
|:---|:---|
| | **2023-2024** |
| Portfolio expenditures | -138 392 |
| Debt service | -9 464 |
| **TOTAL EXPENDITURE** | **-147 856** |

---

TABLE 5

**Québec government**

**Portfolio expenditures**

**Forecasts for 2023-2024**

(millions of dollars)

---

| | |
|:---|:---|
| | **2023-2024** |
| **PORTFOLIO EXPENDITURES** |  |
| Affaires municipales et Habitation | 4 546 |
| Agriculture, Pêcheries et Alimentation | 1 504 |
| Conseil du trésor et Administration gouvernementale | 2 797 |
| Conseil exécutif | 862 |
| Culture et Communications | 1 904 |
| Cybersécurité et Numérique | 173 |
| Économie, Innovation et Énergie | 3 680 |
| Éducation | 20 203 |
| Emploi et Solidarité sociale | 5 250 |
| Enseignement supérieur | 10 480 |
| Environnement, Lutte contre les changements climatiques, Faune et Parcs | 2 283 |
| Famille | 8 210 |
| Finances | 3 242 |
| Immigration, Francisation et Intégration | 727 |
| Justice | 1 481 |
| Langue française | 63 |
| National Assembly | 173 |
| Officers of the National Assembly | 139 |
| Relations internationales et Francophonie | 170 |
| Ressources naturelles et Forêts | 1 474 |
| Santé et Services sociaux | 59 015 |
| Sécurité publique | 2 336 |
| Tourisme | 503 |
| Transports et Mobilité durable | 6 957 |
| Travail | 220 |
| **TOTAL** | **138 392** |
| **DEBT SERVICE** | **9 464** |
| **TOTAL EXPENDITURE** | **147 856** |

---

Note: Totals may not add due to rounding.

## Exhibit 99.21

------

**Exhibit 99.21**

**Section C**

**REPORT ON THE APPLICATION OF THE<br> LEGISLATION RESPECTING A BALANCED BUDGET,<br> DEBT REDUCTION AND THE GENERATIONS FUND**

---

| | | | |
|:---|:---|:---|:---|
| **1.** | ***Balanced Budget Act*** | ***Balanced Budget Act*** | **C.3** |
|  | 1.1 | Budgetary balance within the meaning of the *Balanced Budget Act* | C.5 |
|  | 1.2 | Stabilization reserve | C.8 |
| **2.** | ***Act to reduce the debt and establish the Generations Fund*** | ***Act to reduce the debt and establish the Generations Fund*** | **C.9** |
|  | 2.1 | Debt reduction | C.9 |
|  | 2.2 | Generations Fund | C.11 |

---

---

| | | |
|:---|:---|:---|
| **Appendix:** | **Current provisions of laws** | **C.15** |

---

C.1

**1.**  ***Balanced Budget Act*** 

Pursuant to the *Balanced Budget Act*, the Minister of Finance must report to the National Assembly, in the budget speech, on the achievement of the objectives of the Act and any variance recorded.

The purpose of the *Balanced Budget Act* is to oblige the government to maintain a balanced budget and table a balanced financial framework. In general, the Act specifies the calculation of the budgetary balance, establishes a stabilization reserve and sets out the applicable rules in the case of a surplus or an overrun.

— Current provisions of the *Balanced Budget Act* are set out in the Appendix.

Report on the Application of the Legislation Respecting <br> a Balanced Budget, Debt Reduction and the Generations Fund C.3

**Lifting of the suspension and modernization<br> of the *Balanced Budget Act***

**Lifting of the suspension of certain effects of the Act**

The *Balanced Budget Act* was amended by Bill 17,<sup>1</sup> assented to on February 24, 2022, which temporarily suspends certain effects of the Act from 2021-2022 until the end of the fiscal year determined by the Minister, that is, no later than the fiscal 2023-2024 Budget Speech.

The desired effects of the suspension are:

---

| |
|:---|
| the prohibition of an actual or forecast budgetary deficit; |
| the tabling of a plan to restore fiscal balance; |
| the obligation to implement offsetting measures for overruns. |

---

In order to meet the Act's requirements, the Minister of Finance is lifting the suspension of these effects as of the end of fiscal 2022-2023.

As a result, the financial framework of Budget 2023-2024 includes a plan to restore a balanced budget by 2027-2028. The plan presented, whereby the deficit will be limited to $4 billion in 2023-2024, and thereafter progressively reduced by $1 billion per year until fiscal balance is achieved, constitutes the government's plan for restoring fiscal balance.

As such, the fiscal framework calls for a $1-billion decrease in the deficit in 2023-2024 compared with 2022-2023. Considering the changing revenue outlook, the expenditure level has therefore been determined so as to reduce the deficit in accordance with the requirements of the Act.

**Modernization of the *Balanced Budget Act***

Since its enactment in 1996, the *Balanced Budget Act* has been amended on several occasions, essentially to suspend some of its effects during periods of recession or economic instability.

Since experience has revealed the difficulties of enforcing the Act in a context of major economic slowdown, Budget 2023-2024 provides an opportunity to modernize certain of its provisions.

The government wishes specifically to:

---

| |
|:---|
| improve fiscal flexibility in determining the fiscal balance; |
| update the rules requiring the tabling of a plan to offset budget overruns, including the threshold and timeframe for when such a plan is required; |
| revise the rules governing the execution of this plan, including the implementation of measures to offset overruns and the time period for offsetting overruns; |
| abolish the stabilization reserve. |

---

Proposed details will be specified at a later date.

<sup>1</sup> *An Act respecting the implementation of certain provisions of the Budget Speech of 25 March 2021 and amending other provisions* (S.Q. 2022, c. 3).

Budget 2023-2024 <br> C.4 Additional Information

![](ex99-21_002.jpg)

**1.1** **Budgetary balance within the meaning of the**  ***Balanced Budget Act*** 

The objectives of the *Balanced Budget Act* are achieved if the budgetary balance, calculated in accordance with the Act, is zero or positive.<sup>1</sup>

The budgetary balance corresponds essentially to the surplus or deficit presented in the Public Accounts (book balance) reduced by the amount of revenues dedicated to the Generations Fund and adjusted to take certain accounting changes into consideration, if applicable.

A balanced budget as defined in the Act was maintained in 2021-2022 through the use of $772 million from the stabilization reserve.

For 2022-2023, the budgetary balance within the meaning of the Act is in deficit by $4.6 billion after the use of $449 million from the stabilization reserve.

— The stabilization reserve was fully used for fiscal 2022-2023.

The Balanced Budget Act was amended in order to suspend the obligation to achieve a balanced budget in 2022-2023.

The budgetary balance is in deficit by $4.0 billion for 2023-2024, and remains in deficit for the following three years. Therefore, the financial framework in the 2023-2024 budget presents a fiscal plan to progressively eliminate the deficit within five years.

<sup>1</sup> The budgetary data for 2022-2023 and subsequent years presented in this section are forecasts.

Report on the Application of the Legislation Respecting <br> a Balanced Budget, Debt Reduction and the Generations Fund C.5

**☐** **The plan for restoring fiscal balance**

In early 2020, the COVID-19 pandemic caused a shock of unprecedented magnitude, sending the economy into a short but deep recession. Global economic activity quickly began to recover in a synchronized fashion, but this generated inflationary pressures that caused a quick and substantial interest rates hike.

Despite this economic instability, the government has maintained adequate funding for the government's main missions, thereby generating deficits. With the move to a more stable economic environment, Budget 2023-2024 is an opportunity for the government to table its plan for restoring fiscal balance.

According to this plan, the deficit will be limited to $4.0 billion in 2023-2024, and will thereafter be progressively reduced by $1.0 billion per year until fiscal balance is achieved in 2027-2028.

The fiscal framework calls for a $1.0-billion decrease in the deficit in 2023-2024 compared with 2022-2023. Considering the changing budgetary outlook concerning revenue, the expenditure level has been determined so as to reduce the deficit in accordance with the requirements of the Act.

---

| |
|:---|
| CHART C.1<br>**Budgetary balance of the plan for restoring fiscal balance** |
| (billions of dollars) |

---

![](ex99-21_001.jpg)

Budget 2023-2024 <br> C.6 Additional Information

![](ex99-21_002.jpg)

TABLE C. 1 <br>**Budgetary balance within the meaning of the *Balanced Budget Act***

(millions of dollars)

---

| | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|
| | | | | | **Stabilization reserve** | **Stabilization reserve** | |
| <br>**Fiscal year** | **Surplus (deficit) within the meaning of the Public**<br>**Accounts<sup>(1)</sup>** | **Revenues<br> dedicated <br> to the Generations**<br>**Fund** | **Accounting and other**<br>**changes<sup>(2)</sup>** | **Budgetary balance within the meaning**<br>**of the Act** | **Allocations** | **Uses** | **Budgetary balance within the meaning of the Act after**<br>**reserve<sup>(3)</sup>** |
| 2012-2013 | -3 141 | –961 | 2 502<sup>(4)</sup> | -1 600 |  |  | -1 600<sup>(5)</sup> |
| 2013-2014 | -2 100 | -1 121 | 397 | –2 824 |  |  | -2 824<sup>(5)</sup> |
| 2014-2015 | –534 | -1 279 | 1 088 | –725 |  |  | –725<sup>(5)</sup> |
| 2015-2016 | 3 456 | -1 453 | 188 | 2 191 | -2 191 |  |  |
| 2016-2017 | 4 147 | -2 001 | 215 | 2 361 | -2 361 |  |  |
| 2017-2018 | 3 014 | -2 293 | 1 901 | 2 622 | -2 622 |  |  |
| 2018-2019 | 7 890 | -3 477 | 390 | 4 803 | -4 803 |  |  |
| 2019-2020 | 2 083 | -2 606 | 527 | 4 | –4 |  |  |
| 2020-2021 | -4 226 | -3 313 | -3 221 | -10 760 |  | 10 760 |  |
| 2021-2022 | 2 845 | -3 617 |  | –772 |  | 772 |  |
| 2022-2023 | -1 670 | -3 351 |  | -5 021 |  | 449 | -4 572<sup>(6)</sup> |
| 2023-2024 | -1 625 | -2 373 |  | -3 998 |  |  | -3 998 |

---

---

| | |
|:---|:---|
| (1) | The annual surpluses (deficits) were restated to take into account the change in the application of the accounting standard respecting transfer payments. |
| (2) | In order to comply with the provisions of the *Balanced Budget Act*, adjustments to the restated annual surpluses and deficits in the Public Accounts are required to establish the budgetary balance. Adjustments were made to take into account the change in the application of the accounting standard respecting transfer payments and its impact on the accumulated deficit in 2020-2021. |
| (3) | The budgetary balance within the meaning of the *Balanced Budget Act* after reserve corresponds to the budgetary balance that takes into account allocations to the stabilization reserve |
|  | and uses of it in order to maintain a balanced budget or reduce the budgetary deficit. |
| (4) | The *Balanced Budget Act* stipulates the exclusion of Hydro-Québec's exceptional loss of $1 876 million for the closure of the Gentilly-2 nuclear power plant from the calculation of the budgetary balance for fiscal 2012-2013. |
| (5) | The budgetary deficits of $1.6 billion, $2.8 billion and $0.7 billion recorded for 2012-2013, 2013-2014 and 2014-2015, respectively, are allowed pursuant to the *Balanced Budget Act*. |
| (6) | The *Balanced Budget Act* was amended in order to suspend the obligation to achieve a balanced budget from March 25, 2021 to March 31, 2023. |

---

Report on the Application of the Legislation Respecting <br> a Balanced Budget, Debt Reduction and the Generations Fund C.7

**1.2** **Stabilization reserve** 

Under the *Balanced Budget Act*, a recorded surplus, that is, a budgetary balance that is greater than zero, must be allocated to the stabilization reserve.

This reserve is a budgetary tool that was established to facilitate multi-year planning of the government's financial framework.

The balance of the stabilization reserve is adjusted on the basis of recorded surpluses allocated to the reserve or sums used from the reserve for each fiscal year.

The reserve acts like a counter made up of surpluses achieved, but it does not consist of surplus cash, as generated surpluses are used to reduce the debt. In other words, the stabilization reserve is not money in the bank. Its use gives rise to an increase in the debt.

Taking into account the budgetary deficits in 2020-2021 and 2021-2022, and a deficit greater than the balance of the stabilization reserve in 2022-2023, the balance of the stabilization reserve will be zero as at March 31, 2023.

TABLE C.2

**Operations of the stabilization reserve**

(millions of dollars)

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | | | **Uses** | **Uses** | |
| <br>**Fiscal year** | **Balance,**<br> **beginning of year** |<br>**Allocations** | **Balanced budget** | **Generations Fund** |<br>**Balance,<br> end of year** |
| 2015-2016 |  | 2 191 |  |  | 2 191 |
| 2016-2017 | 2 191 | 2 361 |  |  | 4 552 |
| 2017-2018 | 4 552 | 2 622 |  |  | 7 174 |
| 2018-2019 | 7 174 | 4 803 |  |  | 11 977 |
| 2019-2020 | 11 977 | 4 |  |  | 11 981 |
| 2020-2021 | 11 981 |  | –10 760 |  | 1 221 |
| 2021-2022 | 1 221 |  | –772 |  | 449 |
| 2022-2023 | 449 |  | –449 |  |  |
| 2023-2024 |  |  |  |  |  |

---

Budget 2023-2024 <br> C.8 Additional Information

![](ex99-21_002.jpg)

**2.**  ***Act to reduce the debt and establish the Generations Fund*** 

2.1 **Debt reduction** 

The *Act to reduce the debt and establish the Generations Fund* was adopted in 2006. By reducing the debt burden, it aims to ensure long-term funding for the government's main missions as well as a prosperous tomorrow for future generations.

Since 2010, the Act stipulates that for fiscal 2025-2026, gross debt must not exceed 45% of GDP, while debt representing accumulated deficits must not exceed 17% of GDP. These targets were set as a result of the 2008 financial crisis and changes to government accounting, which made it impossible to reach the targets established in 2006.<sup>2</sup>

As at March 31, 2023, the gross debt-to-GDP ratio will stand at 40.2%, which is below the 45% objective. The accumulated deficit debt-to-GDP ratio will stand at 20.5%.

Québec has made remarkable progress in reducing its debt load in recent decades, but remains one of the most indebted provinces.

Reducing the debt burden remains a priority for the government.

**☐** **The new debt reduction objective**

As at March 31, 2023, net debt will stand at 37.4% of GDP. The government is announcing that it intends to gradually reduce the net debt to within a range of 27.5% of GDP to 32.5% of GDP within the next 15 years, that is, by fiscal year 2037-2038.<sup>3</sup>

The median net debt reduction target will therefore stand at 30% of GDP.

Based on this target, Québec's net debt burden will therefore gradually move toward the current average net debt of the provinces (31% of GDP as at March 31, 2022).

The government also aims for the net debt burden to be 33% of GDP by 2032-2033. This is an intermediate target.

At a time when it is difficult to forecast how the economy will change over the long term, the government has decided to provide an interval for these two targets. This will allow it to respond to negative economic shocks or to increase investment, if necessary, in public infrastructure.

<sup>2</sup> The current provisions of the *Act to reduce the debt and establish the Generations Fund* are set out in the Appendix.

<sup>3</sup> Section I of the *Québec Budget Plan – March 2023*, "The Québec Government's Debt," provides detailed information on the Québec government's debt.

Report on the Application of the Legislation Respecting <br> a Balanced Budget, Debt Reduction and the Generations Fund C.9

TABLE C.3

**The new debt reduction targets**

---

| | |
|:---|:---|
| Net debt by 2032-2033 (intermediate target) | 33% of GDP (±2.5% of GDP) |
| Net debt by 2037-2038 | 30% of GDP (±2.5% of GDP) |

---

Changes to the *Act to reduce the debt and establish the Generations Fund* will be proposed in this regard.

---

| |
|:---|
| **Accountability based on net debt** |
| &nbsp;&nbsp; Like Ontario and other provinces, Québec will focus its reporting on net debt, which is a concept also used by the OECD and the IMF. The net debt:<br>– takes into account the government's borrowings arising from substantial capital investments;<br>– subtracts financial assets that will ultimately be used to reduce the debt on financial markets;<br>– is readily comparable from one province to another.<br>However, information on all concepts of debt will continue to be presented to meet the needs of the various users of the budget documents. |

---

Budget 2023-2024 <br> C.10 Additional Information

![](ex99-21_002.jpg)

**2.2** **Generations Fund** 

**☐** **Deposits in the Generations Fund in 2022-2023**

In 2022-2023, revenue totalling $3.4 billion will be dedicated to the Generations Fund. The $94 million downward adjustment from the March 2022 budget is mainly the result of lower-than-anticipated realized investment income, partly offset by the rise in mining revenues.

— Realized investment income was adjusted downward because of realized gains that were lower than anticipated.

TABLE C.4 <br>**Generations Fund – 2022-2023** 

(millions of dollars)

---

| | | | |
|:---|:---|:---|:---|
|  | **March 2022<sup>(1)</sup>** | | **March 2023** |
| | **2022-2023** |<br>**Adjustments** | **2022-2023** |
| **Book value, beginning of year<sup>(2)</sup>** | **15 669** | **160** | **15 829** |
| **Dedicated revenues** |  |  |  |
| Water-power royalties |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Hydro-Québec | 763 | 22 | 785 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Private producers | 107 | 5 | 112 |
| **Subtotal** | **870** | **27** | **897** |
| Indexation of the price of heritage electricity | 535 | 9 | 544 |
| Additional contribution from Hydro-Québec | 215 |  | 215 |
| Mining revenues | 484 | 275 | 759 |
| Specific tax on alcoholic beverages | 500 |  | 500 |
| Unclaimed property | 55 | 23 | 78 |
| Investment income<sup>(3)</sup> | 786 | –428 | 358 |
| **Total dedicated revenues** | **3 445** | **–94** | **3 351** |
| **BOOK VALUE, END OF YEAR** | **19 114** | **66** | **19 180** |

---

(1) This is the March 2022 budget forecast.

(2) For information purposes, as at December 31, 2022, the fair value of the Generations Fund was $17.8 billion, $0.3 billion less than its book value.

(3) The investment income of the Generations Fund corresponds to realized investment income (interest income, dividends, gains on the disposal of assets, etc.). Therefore, the forecast may be adjusted upward or downward according to when the gains or losses are actually realized.

Report on the Application of the Legislation Respecting <br> a Balanced Budget, Debt Reduction and the Generations Fund C.11

**☐** **Revenues that will be dedicated to the Generations Fund from 2023-2024**

The Generations Fund is an important pillar of the debt reduction strategy. Just as it did when the Generations Fund was established in 2006, the government will continue to bank on the wealth of Québec's hydroelectricity.

As of 2023-2024, three sources of revenue will be dedicated to the Generations Fund:

— water-power royalties, which are paid by Hydro-Québec and private hydroelectricity producers;

an additional contribution from Hydro-Québec, which will be set at $650 million per year;

— This contribution will be taken from the dividend paid by Hydro-Québec to the government. It will have no impact on hydroelectricity rates.

— income generated by the investment of the sums making up the Generations Fund.<sup>4</sup>

Deposits in the Generations Fund will not be subject to an annual cap.

Changes to the *Act to reduce the debt and establish the Generations Fund* will be proposed in this regard.

From 2023-2024 to 2027-2028, deposits in the Generations Fund are expected to average $2.6 billion per year. This is a higher amount than the average of the last 10 years. From 2013-2014 to 2022-2023, revenues dedicated to the Generations Fund averaged $2.5 billion per year.

In 2023-2024, revenues totalling $2.4 billion will be dedicated to the Generations Fund.<sup>5</sup> They will gradually increase to reach $2.8 billion in 2027-2028 and nearly $5.0 billion in 2037-2038.

Without these changes, revenues dedicated to the Generations Fund would have amounted to $3.9 billion in 2023-2024 and $5.4 billion in 2027-2028.

<sup>4</sup> Revenues resulting from the indexation of the price of heritage electricity, mining revenues, an annual sum of $500 million from the specific tax on alcoholic beverages and unclaimed property will no longer be deposited in the Generations Fund. In addition, gifts, legacies and other contributions received by the Minister of Finance may continue to be deposited in the Generations Fund.

<sup>5</sup> The portion of the amounts provided for in the March 2022 budget that will not be deposited in the Generations Fund will be allocated to financing the 1-percentage-point reduction in the first two tax brackets as of 2023.

Budget 2023-2024 <br> C.12 Additional Information

![](ex99-21_002.jpg)

**☐** **Use of the Generations Fund to repay borrowings**

As at March 31, 2023, the balance of the Generations Fund will amount to $19.2 billion. The government is announcing that withdrawals of $2.5 billion per year will be made in 2023-2024 and 2024-2025.<sup>6</sup>

These withdrawals will serve to reduce the financing program and alleviate debt service in the current context of high interest rates.<sup>7</sup>

The interest savings associated with these withdrawals are estimated at $801 million over five years, that is, from 2023-2024 to 2027-2028.

TABLE C.5 <br>**Generations Fund**

(millions of dollars)

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **2023-<br> 2024** | **2024-<br> 2025** | **2025-<br> 2026** | **2026-<br> 2027** | **2027-<br> 2028** |
| **Book value, beginning of year<sup>(1)</sup>** | **19 180** | **19 053** | **18 940** | **21 464** | **24 171** |
| **Dedicated revenues** |  |  |  |  |  |
| Water-power royalties |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp;Hydro-Québec | 825 | 845 | 868 | 932 | 931 |
| &nbsp;&nbsp;&nbsp;Private producers | 109 | 109 | 112 | 114 | 116 |
| &nbsp;&nbsp;&nbsp;**Subtotal** | **934** | **954** | **980** | **1 046** | **1 047** |
| Additional contribution from<br> Hydro-Québec | 650 | 650 | 650 | 650 | 650 |
| Investment income<sup>(2)</sup> | 789 | 783 | 894 | 1 011 | 1 136 |
| **Total dedicated revenues** | **2 373** | **2 387** | **2 524** | **2 707** | **2 833** |
| Use of the Generations Fund<br> to repay borrowings | -2 500 | -2 500 |  |  |  |
| **BOOK VALUE, END OF YEAR** | **19 053** | **18 940** | **21 464** | **24 171** | **27 004** |
| &nbsp;&nbsp;&nbsp;***As a % of net debt*** | ***8.9*** | ***8.6*** | ***9.5*** | ***10.5*** | ***11.6*** |
| &nbsp;&nbsp;&nbsp;***As a % of GDP*** | ***3.4*** | ***3.2*** | ***3.5*** | ***3.8*** | ***4.1*** |

---

(1) For information purposes, as at December 31, 2022, the fair value of the Generations Fund was $17.8 billion, $0.3 billion less than its book value.

(2) The investment income of the Generations Fund corresponds to realized investment income (interest income, dividends, gains on the disposal of assets, etc.). Therefore, the forecast may be adjusted upward or downward according to when the gains or losses are actually realized. An annual return of 4.6% is expected, a rate based on six historic years.

<sup>6</sup> Pursuant to the *Act to reduce the debt and establish the Generations Fund*, the Fund is used solely to pay down gross debt.

<sup>7</sup> These withdrawals are presented in the government's financing program (page I.26 of the *Québec Budget Plan – March 2023*).

Report on the Application of the Legislation Respecting <br> a Balanced Budget, Debt Reduction and the Generations Fund C.13

![](ex99-21_002.jpg)

**Appendix:** **Current provisions of laws**

**☐** ***Balanced Budget Act***

The *Balanced Budget Act* (CQLR, chapter E-12.00001) was passed unanimously by the National Assembly on December 19, 1996. The Act stipulates that the government must table balanced budget estimates and sets out the applicable rules in the case of a surplus or an overrun.

Under the *Balanced Budget Act*, if an overrun of less than $1 billion is recorded for a fiscal year, the government must achieve an equivalent surplus in the next fiscal year.

The Act stipulates that the government may incur overruns for a period of more than one year, where such overruns total at least $1 billion as a result of circumstances defined in the Act, namely, a disaster having a major impact on revenue or expenditure, a significant deterioration of economic conditions or a change in federal programs of transfer payments to the provinces that would substantially reduce transfer payments to the government.

If there is an overrun of at least $1 billion, the Minister of Finance must report to the National Assembly on the circumstances justifying that the government incur such overruns. In addition, the Minister must present a financial plan allowing such overruns to be offset within a five-year period and apply offsetting measures covering at least $1 billion as of the fiscal year in which such an overrun is anticipated, or the following year in the case where an overrun is recorded. He must offset at least 75% of any such overruns within the first four fiscal years of that period.

The Act also establishes a stabilization reserve in order to facilitate the government's multi-year budget planning and, subsidiarily, to allow sums to be deposited in the Generations Fund. Any surpluses recorded for a fiscal year are automatically allocated to this reserve whose main purpose is to maintain a balanced budget.

Lastly, the Act stipulates that the Minister of Finance must report to the National Assembly, in the budget speech, on the objectives of the Act, their achievement and any variance recorded, and on the operations of the stabilization reserve.

Report on the Application of the Legislation Respecting <br> a Balanced Budget, Debt Reduction and the Generations Fund C.15

**☐** ***Act to reduce the debt and establish the Generations Fund***

The *Act to reduce the debt and establish the Generations Fund* (CQLR, chapter R-2.2.0.1) was passed on June 15, 2006. This statute established the Generations Fund, a fund dedicated exclusively to repaying the gross debt.

Since 2010, the Act stipulates that for fiscal 2025-2026, gross debt must not exceed 45% of GDP, and the debt representing accumulated deficits must not exceed 17% of GDP.

Under the Act's current provisions, which do not reflect the amendments planned in Budget 2023-2024, the Generations Fund is made up of the following sums drawn from sources of revenue dedicated to repaying the debt:

— water-power royalties paid by Hydro-Québec and private hydroelectricity producers;

— part of Hydro-Québec's earnings on the sale of electricity outside Québec as a result of its increased generating capacity;<sup>8</sup>

— revenues from the indexation of the price of heritage electricity since 2014;

— fees or charges for water withdrawal;<sup>8</sup>

since 2015-2016, the total fees, duties, rentals and mining royalties provided for in the *Mining Tax Act* and the *Mining Act*. This amount is established once the duties allocated to the mining heritage and mining activity management components of the Natural Resources Fund have been subtracted;

in 2014-2015 and 2015-2016, $100 million per year, increasing to $500 million per year as of 2016-2017, from the specific tax on alcoholic beverages;

from 2017-2018 to 2043-2044, $215 million per year from Hydro-Québec;

— sale of government assets, rights or securities;<sup>8</sup>

— unclaimed property administered by Revenu Québec;

— gifts, legacies and other contributions received by the Minister of Finance;

— income generated by the investment of the sums making up the Generations Fund.

<sup>8</sup> A government order is required to set the portion of these amounts that must be allocated to the Generations Fund.

Budget 2023-2024 <br> C.16 Additional Information

![](ex99-21_002.jpg)

The Act allows the government to order that a part, which it establishes, of any sum that would otherwise have been attributed to the General Fund of the Consolidated Revenue Fund be allocated to the Generations Fund.

Similarly, that Act authorizes the government, subject to the provisions of the *Balanced Budget Act*, to use the stabilization reserve to deposit sums in the Generations Fund.

The sums constituting the Generations Fund are deposited with the Caisse de dépôt et placement du Québec and managed in accordance with an investment policy determined by the Minister of Finance, in collaboration with representatives of the Caisse.

The Act also stipulates that the Minister of Finance may take any sum from the Generations Fund and use it to repay the debt.

Lastly, the Act stipulates that the Minister of Finance must report to the National Assembly, in the budget speech, on the evolution of the debt representing accumulated deficits and of the gross debt, on the sums making up the Generations Fund and on any sums used to repay the gross debt.

Report on the Application of the Legislation Respecting <br> a Balanced Budget, Debt Reduction and the Generations Fund C.17