Quebec’s Prudent Path to Balance Narrows: Our Analysis of the Quebec Budget 2026

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The province’s deficit for fiscal year (FY) 2026-27 is projected to be $6.3 billion, down from $7.1 billion from the autumn fiscal update.

The deficit is forecast to gradually shrink over the next few years and reach surplus territory in FY 2029-30.
This includes a cumulative $6.7 billion “gap to be bridged” before reaching surplus, however, and the province hopes it will eliminate the gap once economic uncertainty subsides.
Quebec has also announced several new initiatives in Budget 2026 with close to $9.6 billion in additional spending over the five-year planning horizon (2026–27 to 2030–31), structured around three key objectives.
Under the first objective, the government is investing $1.7 billion over five years to accelerate Quebec’s economic transformation, including $700 million for innovation and competitiveness, $580 million to support regional SMEs (notably in agri-food, forestry, and tourism), and $430 million for the media and cultural sectors. In addition, $2.0 billion is being reserved to protect local head offices and support the development of critical minerals.
Budget 2026 allocates nearly $4.3 billion to support key public services, with a focus on health care ($2.2 billion), education ($640 million), higher education and training ($400 million), and public safety (over $1 billion). These investments aim to reduce wait times, improve school infrastructure, and enhance access to justice.
Under the third objective, the government has allocated $3.6 billion in new funding to support Quebecers and strengthen communities. Of this, $2.4 billion is aimed at addressing cost-of-living pressures, including housing and childcare, while approximately $1.0 billion supports community resilience and climate adaptation, and $220 million promotes cultural heritage.
Similar to other provinces this budget season, Quebec has included a contingency reserve of $2.0 billion for each of the next two fiscal years in its financial framework, with annual reserves of $1.5 billion set aside for the following four years. The reserve is intended to mitigate the effects of weaker than anticipated economic growth during this period of heightened uncertainty.
The government remains committed to curbing spending growth over the coming years to attain a surplus by 2029-30. Expenditures excluding debt services are anticipated to rise on average by only 1.9 per cent annually over the next five years. Meanwhile, revenues are forecast to increase by 3.2 per cent annually over the same period.
Spending in healthcare and social services will account for most of the expenditure increases, rising by 4.1 per cent in FY2026-27 and 2.2 per cent in FY 2027-28.

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Key insights

Budget 2026 expects modest economic growth over the forecast period. These predictions appear reasonable. The province’s outlook will be weighed down by elevated economic uncertainty this year and a stagnating population over the remainder of the decade. The province projects real GDP growth of 1.1 per cent in 2026 and 1.4 per cent in 2027. However, we see more pronounced downside risks to the 2026 outlook. Trade tensions with the United States remain a key source of concern, with signs that tariff fatigue is already weighing on economic activity. Upcoming renegotiations on CUSMA later this year could trigger renewed tariff threats from the Trump administration, keeping both consumer and business confidence subdued. Meanwhile, the ongoing conflict in the Middle East adds another layer of global uncertainty. With shelter and food inflation still elevated, any extended increase in gasoline prices risks putting additional pressure on household spending.

The projected below 2.0 per cent average annual growth in expenditures implies a high degree of fiscal restraint, which may prove difficult to sustain given Quebec’s demographic outlook and health-care pressures. While total population growth is expected to remain flat over the budget horizon, by our estimates, the population aged 68 and over is projected to grow by close to 3.0 per cent annually, adding more than 300,000 people by 2031 in the most health-care-intensive cohorts. With health care accounting for 40 per cent of program spending and facing persistent cost pressures—including labour intensity and wage growth outpacing inflation—spending will likely need to grow by about 5.0 per cent annually, in line with the past decade, simply to maintain the current system. In this context, the expenditure path outlined in the budget is optimistic, suggesting potential upward pressure on spending and deficits over the medium term.

Quebec continues to have one of the highest net debt-to-GDP ratios among Canadian provinces, and this ratio is expected to rise modestly over the coming years. At the same time, pressures on public services—particularly health care—combined with a stagnating tax base due to lower migration targets, present significant challenges for the government’s fiscal plan. These factors are expected to weigh on the government’s ability to return to balance by FY 2029-30. With a high debt-to-GDP ratio, this could also constrain the province’s ability to respond to future crises.

Quebec’s Prudent Path to Balance Narrows: Our Analysis of the Quebec Budget 2026

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Key insights

2026 Budget Analyses