The repercussions of a second lockdown on non-essential consumer spending could reduce from 660 million to 2.1 billion the taxes that enter the coffers of the Quebec government, estimates the Institut du Quebec (IdQ) after analyzing eight different scenarios.
This range, specifies the IdQ in its study published Thursday, does not however include the consequences that a new confinement could have on the revenues of state corporations (Hydro-Quebec, SAQ, Loto-Quebec) nor on the expenses in health or financial support to support the economy, for example.
“I was quite surprised by the results, as I thought the impact on lost income would have been much greater. It’s not as catastrophic as I would have thought, ”said Institut du Québec CEO Mia Homsy in an interview. “Internally, we thought it was going to be worse. But we understood that this is because of the scale of the support measures deployed by the federal government. “
All of the transfers aimed at helping individuals and businesses get through the pandemic “ensure that people’s disposable income, ultimately, is higher, that there is savings, but that there is also of consumption ”, said Mme Homsy. Part of this forced saving is finally put back into circulation in the economy by a phenomenon of postponed consumption.
To arrive at the range of 660 million to 2.1 billion, the IdQ established eight scenarios and used the model of an external firm, DAMÉCO. The objective was to measure the impact of the scenarios on household spending, which has different effects in the economy (jobs, investments, etc.) and contributes to the gross domestic product. The scenarios are based on two main variables, namely the intensity of the reduction in consumption and the duration of the confinement (a period similar to that of spring vs. a period of four weeks).
“What is worrying is something that is watermarked in the report and that is not addressed head-on, but it is the cost of it all,” said Mme Homsy. “So the support measures for people and the economy, but also the expenses that will follow for structural damage, such as health, education, and for sectors that will absolutely need help to recover. “
Four billion aside
Finance Minister Eric Girard intends to publish an economic update on November 12. Quebec announced in June that it was setting aside a provision of four billion to deal with “potential economic risks, cover additional health care expenses and finance additional support and stimulus measures” for a second wave. For the 2020-2021 financial year, the budget deficit is expected at -14.9 billion. To make up for this shortfall, the government has taken an accounting sum from the stabilization reserve which is based on the surpluses of previous years. The return to equilibrium would take place over five years.
Also during the economic statement of June, Minister Girard indicated that the government has revised downwards its 2020-2021 forecast for own-source revenue, which excludes the revenue of government corporations. The downward revision was 8.1 billion compared to what he forecast when the budget was tabled in March.
As for the revenues of state enterprises, including Hydro-Québec and Loto-Québec, they have been revised downward by $ 1.5 billion. However, we must now take into account an increase of $ 4 billion in federal transfers, which were deployed for an economic recovery. Overall, Quebec has spent $ 28 billion to support economic activity since the start of the pandemic.