The credit rating agency S&P Global Ratings cut the credit rating of the province of Quebec in Canada this month. This downgrade is due to several reasons that weaken the province's fiscal situation, such as declining demographic growth, rising employee compensation, and weaker prospects for tax revenues. According to S&P, Quebec faces persistent operating deficits and large deficits after capital, even before the increase in economic uncertainty related to tariffs.
In a statement issued by S&P, it was highlighted that the province, which has about 9 million inhabitants, could see improvements in its fiscal balances in the coming years, but the provincial elections of 2026 could complicate the outlook. Finance Minister Eric Girard presented a budget plan in March that forecasts a deficit of 13.6 billion Canadian dollars for the fiscal year 2025-2026, with the intention of balancing the budget by 2030 through fiscal changes, spending cuts, and economic growth.
The total public sector debt of Quebec amounts to 351 billion Canadian dollars, which represents approximately 58% of the province's gross domestic product. Despite this downgrade in credit rating, the government of Quebec is committed to responsibly managing public finances and reducing the debt burden for future generations. As of March 31, the province had 16.8 billion Canadian dollars in its Generations Fund, equivalent to 7.1% of its net debt.
The downgrade of Quebec's rating by S&P Global Ratings from AA- to A+ is the first reduction of the foreign issuer credit rating since 1993. This downgrade occurs in a context where the trade war with the United States is beginning to affect the province's economic growth and public finances.
