Quebec, at the heart of the OECD


The Chair in Taxation and Public Finance of the Université de Sherbrooke publishes each year a high quality tool: the public finance panorama. This document is full of data and graphics that are devoured like a baseball fan in the avalanche of statistics that only this sport can produce! This "panorama" (what a nice old-fashioned word, is not it?) Helps us above all to provide a precise insight into Quebec's financial situation by relying on factual, scientific, and non-politicized data.

One of the most interesting data of the study is the estimate made by the researchers Luc Godbout and Michaël Robert-Angers of the adjusted net debt of the Québec public administrations and the comparison with the countries of the OECD.

The result will be surprising: the adjusted net debt of Québec's general government accounted for 53% of GDP in 2017, better than Japan (151.1%), Italy (119%), France (87%), 5%), the United States (80.7%) and the United Kingdom (77.5%), all G7 countries.

Only Canada, at 27.6%, and Germany, at 44.5%, do better than Quebec in the G7. Québec's debt is higher than the OECD average of 42.9%.

The Chair comes to this calculation using the methodology of the OECD and the IMF and including the share of Quebec's debt in the liabilities of the federal government.

Let's go in order. First, before arriving at net debt, we start with the general government gross debt as at March 31, 2018, which is estimated at $ 446.5 billion, or 107% of GDP. To arrive at this impressive figure, the Chair in Taxation and Public Finance added the total debt of the Government of Quebec ($ 244.95 billion) and Quebec's share of the federal liabilities according to the ratio of the population ($ 201.62 billion). .

This scenario on the part of Quebec in the federal debt is the most conservative. The share of the federal debt for Quebec can be expressed in different ways. Researchers use the population ratio here, at 22.9%, to reach $ 201.62 billion.

If we take Quebec's place in Canadian GDP, we are at 19.5%, which gives a lower allocated liability to Quebec of $ 172.08 billion (49.1%). It is also possible to choose to look at the tax revenues that come from Quebec in the great total of the tax revenues of the federal government. We arrive here at 18.4%, or 162.51 billion dollars (47.8%).

Now, to arrive at the debt, from the gross debt established by researchers of $ 446.5 billion, we must subtract nearly $ 65 billion in financial assets (-15.5%), including the Generations Fund. It is also necessary to subtract the assets of $ 70 billion from the Quebec Pension Plan (-16.8%). And then we also remove an estimate of Quebec's participation in the federal government's financial assets, just over $ 90 billion (-21.7%). That gives us an adjusted net debt of $ 221 billion or 53% of GDP.

Thus, if Quebec were a member state of the OECD, it would be ranked 6th out of 35 in terms of gross debt (107%), 13th out of 35 for net debt (53%).

The Chair specifies that the Quebec ratio "is influenced by the net value of the Québec Pension Plan. Nevertheless, if this ratio were calculated without reducing the net indebtedness of the value of this asset, it would be 69.8%, below the United Kingdom (77.5%), United States (80.7%) ratio. %) and France (87.5%) ".

Québec remains one of the most indebted provinces in Canada with high public spending to finance the missions of the state. That being said, "it is also possible to note that Québec's financial situation has improved, particularly with regard to its indebtedness." Today, Quebec has the third highest credit score among the provinces in the country.

Gérald Fillion

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