Presented by the Economic Advisory practice in Quebec.
At the time of this publication, the number of confirmed COVID-19 cases in Quebec totalled 6,101. While this number seems high for the province, remember that numbers of confirmed cases are tied to the number of tests conducted.
On March 13, 2020, in an effort to fight the rising spread of COVID-19, the Government of Quebec declared a health emergency. In addition to the enacted federal restrictions, the Quebec government also imposed the following provincial restrictions:
As a complement to the federal economic measures, the Government of Quebec added the following measures:
As part of our analysis, described below are highlights of the Quebec’s economic outlook as a result of COVID-19.
Our most recent projections for 2020 anticipate a 3.0% to 5.0% contraction of GDP in Quebec for the first quarter followed by a double-digit contraction in the second quarter. A recovery is expected to start at the end of this year and in early 2021.
This contraction of the provincial economy is a result of the imposed restrictions, which are severely affecting the services sector, which makes up close to 73% of the economy. Air transport and tourism businesses, in particular, will be the most affected by the current situation. This is even more concerning given that potential changes is consumer habits are likely, leaving uncertainty about the strength of the recovery.
However, the Quebec economy, which is not strongly tied to oil, may fare better than the western provinces as the price of oil has been doubly affected by the conflict between OPEC members and a reduction in global demand arising from the pandemic restrictions. Furthermore, Quebec’s economy will also be less affected than Ontario’s given a drop in demand in the Canadian automobile industry, which already experienced a 48% decline in sales between February and March.
As for Quebec’s private sector, given that small- and medium-sized enterprises account for about 88% of jobs, the recovery will clearly require a rebound by SMEs. At the same time, SMEs are the most vulnerable to temporary cash flow issues, and according to a March 30 survey published by the Canadian Federation of Independent Business (CFIB), 42% of SMEs are worried they may need to close permanently. As such, most of the federal and provincial efforts have focused on SMEs, as they are critical to Quebec’s economy and facing heightened financial risks. The SMEs that best withstand this crisis will be ready for the economic recovery in the second half of the year.
Mario Iacobacci is a partner in Economic Advisory with Deloitte Canada. He has led a career at the intersection of economics, public policy, and business strategy. He has an international record of accomplishment in infrastructure economics, including cost-benefit analysis for the justification of publicly funded projects, infrastructure funding, and mode choice behavioural modelling. Mario has over 25 years of experience at board and executive levels with clients in North America and Europe. He has advised public sector agencies, institutional investors, and corporate clients on multiple infrastructure projects in North America and Europe, covering all transportation modes including air, road, rail, public transit, highways, and freight rail. He also evaluated procurement policies and options, including public private partnerships (PPPs). Mario holds a PhD in Economics from Cambridge University in the UK. Mario is also Chair of the Transportation Research Board’s Standing Committee on Freight Transportation Economics and Regulation and a member of the Transportation and Economic Development Committee.