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Research Announcement:

Moody's sees the coronavirus pandemic erasing gains Quebec has made over the past five years

13 November 2020

Toronto, November 13, 2020 --

  • Sizeable deficit in 2020/21 expected to decrease quickly
  • Debt to rise but debt burden remains manageable in low interest rate environment

Moody's Investors Service notes in a recently published report that the Province of Quebec's updated fiscal forecast is credit negative given a forecast of multiple years of deficits and rising debt burden due to the coronavirus pandemic. However, credit pressure is expected to be modest as the impact is expected to ease quickly.

"Quebec forecasts a sizeable deficit of CAD15 billion in 2020/21, which includes transfers to the Generations Fund and CAD4 billion in unallocated contingencies. However, deficits will decline by more than half by 2022/23 as budget pressure is forecasted to ease," noted Michael Yake, a Moody's Senior Vice President. "By 2022/23, the deficit prior to transfers to the Generations Fund is expected to only measure 3.0% of revenue, a level that we typically see as credit neutral."

Despite the economic decline caused by the pandemic, Quebec forecasts constant revenue growth across its three-year forecast plan, aided by an important increase in federal transfers in 2020/21 and strong growth in own-source revenues beginning in 2021/22.

The report also notes that Quebec's economic forecast matches Moody's economic forecast for Canada, notably a 6.0% decline in real GDP in 2020 followed by 5.0% growth in 2021. Moody's highlights, however, that risks are tilted to the downside in its economic forecast given the uncertain path of the coronavirus and potential for greater than expected disruptions to economic activity.

To fund the deficits and accelerated capital spending, Moody's forecasts that Quebec's debt will increase and represent around 195% of revenue by 2022/23. While higher than the 167% share recorded in fiscal year 2018/19, the debt burden will mirror the level recorded in 2014/15. Despite erasing gains made over the past five years, the low interest rate environment will result in a more affordable debt burden than recorded at that earlier time.

NOTE TO JOURNALISTS ONLY: For more information, please call one of our global press information hotlines: New York +1-212-553-0376, London +44-20-7772-5456, Tokyo +813-5408-4110, Hong Kong +852-3758-1350, Sydney +61-2-9270-8141, Mexico City 001-888-779-5833, São Paulo 0800-891-2518, or Buenos Aires 0800-666-3506. You can also email us at mediarelations@moodys.com or visit our web site at www.moodys.com.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Michael Yake
Senior Vice President/Manager
Project & Infrastructure Finance
Moody's Canada Inc.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Alejandro Olivo
Associate Managing Director
Project & Infrastructure Finance
Moody's Investors Service, Inc.
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

Releasing Office :
Moody's Canada Inc.
70 York Street
Suite 1400
Toronto, ON M5J 1S9
Canada
JOURNALISTS : 1 212 553 0376
Client Service : 1 212 553 1653

© 2020 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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