INCREASING QUÉBEC AND CANADA’S ECONOMIC POTENTIAL
Calgary – May 2019
www.finances.gouv.qc.ca/en
ECONOMIC AND FISCAL POLICY DIRECTIONS
– Increase Québec’s economic potential by:‐ fostering labour market participation‐ spurring business investment
– Improve services and public infrastructure
– Maintain fiscal balance
– Reduce the debt burden
ECONOMY
Economic growth
QUÉBEC ECONOMIC GROWTH
1,6
0,9
1,4
2,8
2,11,8
1,5
2014 2015 2016 2017 2018 2019 2020
(real GDP, percentage change)
ECONOMY
Compound annual growth rate 2009‐2018
Real GDP: +1.4%
‒ Potential labour pool: +0.2%
‒ Employment rate: +0.7%
‒ Productivity: +0.5%
Household consumption expenditure
QUÉBEC HOUSEHOLD CONSUMPTIONECONOMY
1,6 1,5
2,4
3,2
2,62,0
1,5
2014 2015 2016 2017 2018 2019 2020
(percentage change, in real terms)
Wages and salaries(percentage change, in nominal terms)
2,7
1,82,2
4,85,2
3,2 3,1
2014 2015 2016 2017 2018 2019 2020
Average house price
HOUSING PRICES ARE LOWER IN QUÉBEC
0
400
800
1200
2008 2010 2012 2014 2016 2018
(thousands of dollars)
ECONOMY
983 Vancouver
759 Toronto
402 Montréal
279 Québec City
Real estate transactions by foreign buyers on the island of Montréal
FOREIGN BUYERS STILL HAVE A LIMITED PRESENCE IN QUÉBEC
1,71,4 1,3
1,10,9 1,0 1,1
1,41,7 1,6
2,52,9
3,4
2006 2008 2010 2012 2014 2016 2018
(percentage of total transactions)
ECONOMY
Household debt ratio
QUÉBEC HOUSEHOLD DEBT IS LOWER IN QUÉBEC THAN IN CANADA
167.2
183.0
154.6160.6162.2
189.1
214.0204.5
2010 2012 2014 2016
Canada Québec Ontario British Columbia
(per cent)
ECONOMY
Share of exports in Québec’s GDP, by destination
EXPORTS – AN IMPORTANT SHARE OF QUÉBEC’S GDP
(percentage of nominal GDP, 2018)
ECONOMY
10.8
20.1
3.8 3.3 1.6
7,7
Canada United States Europe Asia Other
38.7
ON
ROC
18.6
QUÉBEC IMPORTS OF OILECONOMY
Algeria
40.8%
Other
51.4%
Canada
7.9%
(per cent)
Sources of Québec’s crude oil supplies – 2017 (per cent)
Sources of Québec’s crude oil supplies – 2012
Algeria
10.3%
Canada
47.6%
Other
6.7%
United States
35.5%
The reversal of the flow of oil through
Enbridge's 9B pipeline at the end of 2015 has
contributed to an important increase in Québec’s crude oil
imports from Alberta.
84
3830
55
‐1
37 36
90
39 3927
2010 2012 2014 2016 2018 2020
8.0 7.9 7.7 7.6 7.7 7.67.1
6.15.5 5.4 5.3
2010 2012 2014 2016 2018 2020
TIGHTENING LABOUR MARKET IN QUÉBEC
Job creation in Québec
ECONOMY
(thousands)
Unemployment rate in Québec(per cent)
46 616
91 768
55 410
110 059
54 348
107 480
Standard of living Productivity
Québec Canada Ontario17.1%
16.6%18.9% Gap
19.9% Gap
(1) Standard of living as measured by real GDP per capita and productivity as measured by real GDP per job.
STANDARD OF LIVING AND PRODUCTIVITY GAPS TO BE ELIMINATEDStandard of living and productivity, 2018(1)
ECONOMY
(in constant 2012 dollars, gap in per cent)
↑ Investment in educa on + ↑ Labour market par cipa on +↑ Private investment + ↓ Debt = Wealth Creation
FOUR PILLARS FOR INCREASING QUÉBEC’S ECONOMIC POTENTIAL ECONOMY
FIRST PILLAR: INVESTING IN EDUCATION, A TOP PRIORITY― Increase of 5.1% in 2019‐2020
― New initiatives: $2.4 billion over 5 years ‐ 4‐year‐old kindergartens‐ An extra hour a day in secondary schools ‐ Early detection of learning disabilities‐ Increased support for the teaching staff‐ Increased funding for CEGEPs and universities
ECONOMY
Budget 2019‐2020 provides $892 million over five years to extend the career of individuals aged 60 and over.
Enhanced tax credit for career extension (personal income tax)
New tax credit available to SMBs relating to payroll taxes for workers aged 60 and over.
Personalized path for new immigrants.
SECOND PILLAR: INCREASING LABOUR MARKET PARTICIPATION Employment rate for individuals aged 55 and over, 2018
ECONOMY
(per cent)72.2 71.8
48.553.1
10.3 13.4
Québec Canada
55 to 59
60 to 64
65 and over
Québec measures to stimulate business investment:
Accelerated depreciation measures (announced in the 2018 update).
These measures are in addition to the general corporate tax rate reductions previously announced.
THIRD PILLAR: INCREASING BUSINESS INVESTMENT Investment in machinery and equipment per private‐sector job, 2018
ECONOMY
(current dollars)
4 449
6 055 5 920
Québec Canada Ontario
8,4%
13,8%
18,7% 18,4%
Québec – 2019 Canada – 2018 United States – 2018 OECD – 2018
Comparison of the marginal effective tax rate (METR) in Québec and that of selected territories
A FAVOURABLE FISCAL ENVIRONMENT FOR INVESTMENTS ECONOMY
INVESTMENTS IN ARTIFICIAL INTELLIGENCE AND PUBLIC INFRASTRUCTURE
― Stimulating innovation to create the jobs of tomorrow by:– investing in innovative projects;– speeding up the adoption of artificial intelligence.
― Investing in public infrastructure:– $115.4 billion over ten years;– 61% to replace outdated infrastructure.
ECONOMY
QUÉBEC’S ECONOMIC PROJECTS THAT BENEFIT WESTERN CANADA MARKETS
―Major economic projects promoting access tointernational markets for Western Canada’s naturalresources are being developed in Québec. For example:
‐ QCRail, which would allow resources from westernprovinces to be exported through the East;
‐ GNL Québec and Gazoduq’s project, which would allowthe transportation and liquefaction of natural gas forexport purposes.
ECONOMY
EXTENSION OF THE RAILWAY NETWORK
PREFERRED PLANNING AREA FOR THE GAZODUQ PROJECT
Source : Gazoduq
Budgetary balance(1), 2015‐2016 to 2023‐2024
FOURTH PILLAR: MAINTAINING A BALANCEDBUDGET…
(millions of dollars and as a percentage of GDP)
PUBLIC FINANCES
(1) Budgetary balance within the meaning of the Balanced Budget Act.
2 191(0.6)
2 361(0.6)
2 622(0.6)
2 500(0.6)
0(0.0)
0(0.0)
0(0.0)
100(0.1)
450(0.1)
2015‐2016
2016‐2017
2017‐2018
2018‐2019
2019‐2020
2020‐2021
2021‐2022
2022‐2023
2023‐2024
44.4 42.339.2 38.6
35.5 35.0 34.3 32.1
14.8 14.2
6.7
4035
N.L. Qué. Ont. N.B. Fed. N.S. Man. P.E.I. B.C. Sask. Alta. 2019 2024
… AND REDUCING THE DEBT BURDEN
Net debt of governments in Canada as at March 31, 2018
DEBT REDUCTION
(percentage of GDP)
Québec
48.2
46.145.3
44.6 44.143.4
42.3 41.9 41.5
2018 2019 2020 2021 2022 2023 2024 2025 2026
Objective achieved 5 yearsearlier than planned
MAINTENANCE OF DEBT REDUCTION OBJECTIVESGross debt as at March 31
DEBT REDUCTION
(as a percentage of GDP)
27.525.6
24.222.9
21.620.3
19.017.7
16.4
25.823.4
22.120.8 19.6
18.317.0 15.7 14.5
2018 2019 2020 2021 2022 2023 2024 2025 2026
With the addition of the stabilization reserve Without the addition of the stabilization reserve
Objective achieved
MAINTENANCE OF DEBT REDUCTION OBJECTIVES (cont.)Debt representing accumulated deficits as at March 31
DEBT REDUCTION
(percentage of GDP)
THE GENERATIONS FUND
The Generations Fund was initially set up in 2006.
― Under the law, the sole purpose of the Fund is to repay the debt.
― The law sets out dedicated revenues that are deposited in the Fund every year.
― All income generated from the Fund must be reinvested into it.
― An amount of $8 billion from the Generations Fund has been used in 2018‐2019 and $2 billion will be used in 2019‐2020 to repay the debt and lower the debt service.
DEBT REDUCTION
Use of the Generations Fund to repay the debt
THE GENERATIONS FUNDDEBT REDUCTION
2018‐2019
2019‐2020
2020‐2021
2021‐2022
2022‐2023
2023‐2024
Book value, beginning of year 12 816 7 922 8 426 11 110 14 057 17 317
Dedicated revenues 3 106 2 504 2 684 2 947 3 260 3 582
Use of the Generations Fund to repay the debt ‐8 000 ‐2 000 ─ ─ ─ ─
Book value, end of year 7 922 8 426 11 110 14 057 17 317 20 899
(millions of dollars)
Government’s financing program(1)
FINANCING PROGRAMS
15 600
3 796
17 398
24 08022 951 21 997
2018‐2019 2019‐2020 2020‐2021 2021‐2022 2022‐2023 2023‐2024
(millions of dollars)
FINANCING
(1) Fiscal year starts April 1st.(2) As at May 15, 2019.
32.2%(2)
completed
11 782
BENCHMARKS IN CANADAFINANCING
Coupon(%)
Date ofissue
Date ofmaturity
Outstanding(1)(M$)
4.50 2010 2020 6 4004.25 2011 2021 7 5003.50 2011 2022 6 9003.00 2012 2023 6 370
5‐year benchmark 3.75 2013 2024 6 0002.75 2015 2025 6 0002.50 2016 2026 6 0002.75 2017 2027 6 0002.75 2018 2028 6 000
10‐year benchmark 2.30 2019 2029 1 0006.25 2000 2032 4 2005.75 2003 2036 4 0835.00 2006 2038 5 0005.00 2009 2041 9 2004.25 2011 2043 7 5003.50 2013 2045 10 0003.50 2015 2048 11 000
30‐year benchmark 3.10 2019 2051 2 000
(1) As at May 15, 2019.
31 benchmarks in US dollars and euros since 2001
BENCHMARKS IN US DOLLARS AND EUROSFINANCING
US$ Euros2019‐2020 1.00 B – April 2019 (5Y)
2018‐2019 1.00 B – July 2018 (10Y)
2017‐2018 1.25 B – Sept. 2017 (3Y FRN)1.25 B – April 2017 (10Y)
2.25 B – May 2017 (10Y)
2016‐2017 2.00 B – January 2017 (5Y)1.00 B – July 2016 (3Y FRN)2.00 B – April 2016 (10Y)
2015‐2016 1.20 B – Sept. 2015 (3Y FRN) 1.10 B – October 2015 (10Y)
2014‐2015 1.60 B – October 2014 (10Y) 1.75 B – January 2015 (10Y)
2013‐2014 1.00 B – January 2014 (10Y)1.00 B – July 2013 (10Y)
GREEN BOND PROGRAM
Québec has set up a Green Bond program in February 2017– Québec has issued four times under this program
‐ 500M $CAD with a 5‐year maturity (March 3, 2022)‐ 500M $CAD with a 5‐year maturity (March 1, 2023)‐ 500M $CAD with a 7‐year maturity (July 6, 2025)‐ 800M $CAD with a 5‐year maturity (February 22, 2024)
‐ All issues were done under a global documentation
– These Green Bond issues will finance public transit projects, mainly the purchase of new Azur métro cars in Montréal and the construction of an automated light rail network in the Greater Montréal area (REM)
– Québec is a regular issuer of Green Bondshttp://www.finances.gouv.qc.ca/en/RI_GB_Green_Bonds.asp
– CICERO: Awarded a dark green rating on the framework
FINANCING
QUÉBEC’S CREDIT RATINGSCREDIT RATINGS
2019
Agency CreditRating Outlook
Moody’s Aa2 Stable
Standard & Poor’s (S&P) AA– Stable
Fitch AA– Stable
DBRS A (high) Stable
Japan Credit Rating Agency (JCR) AA+ Stable
China Chengxin International (CCXI) AAA Stable
BUDGET 2019‐2020
― An ambitious economic agenda
― Québec’s situation remains strong
― The economy continues to grow
― The financial framework is balanced
― The debt burden is constantly decreasing
― Budget 2019‐2020 includes measures to stimulate Québec’s economic growth beyond its 1.3% potential
CONCLUSION
ADDITIONAL INFORMATION
Québec’s real GDP by sector in 2018
A MODERN AND DIVERSIFIED ECONOMYECONOMY
Services: 72.4%Unprocessed natural resources: 4.3%
Construction: 6.4%– Finance, insurance,
real estate and leasing: 17.4%
– Education and health: 14.2%
– Trade: 11.4%
– Government services: 7.3%
– Professional, scientific and technical services: 6.2%
– Transportation and warehousing: 4.2%
– Other: 11.7%
Manufacturing: 13.5%– Food, beverages and
tobacco: 2.4%
– Metallic products and primary metal processing: 2.3%
– Transportation equipment: 2.0%
– Wood and paper: 1.4%
– Chemical products and petroleum derivatives: 1.2%
– Other: 4.2%
Utilities: 3.5%
HYDRO‐QUÉBEC & PLAN NORDECONOMY
― Hydro‐Québec’s electricity is produced almostexclusively through hydropower, a clean andrenewable source of energy which allows Québecto produce the lowest level of GHG emissions inCanada with regard to electricity production.
― The Plan Nord territory covers 72% of Québec’sgeographic area.
― Approximately $2.7 billion will be invested overa 25‐year period to support large‐scale strategicdevelopment projects.
― Many active mines and mining projects that couldgenerate nearly $7 billion in investments over thenext few years.
― $1 billion through the Mining and HydrocarbonCapital Fund ($500 million for projectsimplemented on the Plan Nord territory).
Net interprovincial migration
NET INTERPROVINCIAL MIGRATION
‐6 8001 4387 799
‐9 199‐9 083‐20 000
‐10 000
0
10 000
20 000
30 000
40 000
50 000
2006‐2007 2008‐2009 2010‐2011 2012‐2013 2014‐2015 2016‐2017
Québec Alberta British Columbia Manitoba Saskatchewan
(in persons)
ECONOMY
Equalization payments, 2019‐2020
EQUALIZATION PAYMENTSPUBLIC FINANCES
(millions of dollars)
Equalization payments, 2019‐2020(dollars per capita)
13 124
2 255 2 023 2 015419
Qué. Man. N.B. N.S. P.E.I.
2 8332 650
2 134
1 712 1 593
P.E.I. N.B. N.S. Man. Qué.
Consolidated revenue, 2019‐2020
CONSOLIDATED REVENUE
(per cent)
PUBLIC FINANCES
Personal income tax
28.1%
Federal transfers
21.6%Consumption taxes
18.9%
Duties, permits and miscellaneous revenue
12.9%
Corporate taxes
7.4%
Contribution for health services
5.7%
Government enterprises
4.1%School property tax
1.3%
(1) Excluding debt service.
Consolidated expenditure(1) by portfolio, 2019‐2020
CONSOLIDATED EXPENDITURE BY PORTFOLIO
(per cent)
PUBLIC FINANCES
Health and Social Services
43.7%
Education and Higher Education
23.5%
Families
6.0%
Labour, Employment and Social Solidarity
5.0%
Other portfolios
21.8%
2018‐2019 2019‐2020 2020‐2021
Own‐source revenue 90 146 4.9% 90 714 0.6% 93 789 3.4%
Federal transfers Consolidated revenue
23 411 4.1% 24 924 6.5% 25 600 2.7%113 557 4.8% 115 638 1.8% 119 389 3.2%
Portfolio expenditures –99 052 5.1% –104 038 5.0% –107 467 3.3%
Debt service Consolidated expenditure
–8 899 –3.7% –8 996 1.1% –9 138 1.6%–107 951 4.3% –113 034 4.7% –116 605 3.2%
Contingency reserve — –100 –100
SURPLUS 5 606 2 504 2 684
Deposit of dedicated revenues in the Generations Fund –3 106 –2 504 –2 684
BUDGETARY BALANCE 2 500 — —
Consolidated financial framework
A BALANCED FINANCIAL FRAMEWORKPUBLIC FINANCES
(millions of dollars, percentage change)