S&P Global Ratings downgraded Canada’s second-largest province as the trade war with the U.S. begins to hurt economic growth and government finances.
The move to A+ from AA- is S&P’s first reduction in Quebec’s foreign issuer credit rating since 1993, according to data compiled by Bloomberg. The firm also lowered its rating on British Columbia this month.
Slowing population growth, higher employee compensation and a softer outlook for tax revenues are among the factors weakening Quebec’s fiscal standing, the ratings firm said. The province, which has about 9 million people, was set to have “persistent operating deficits and large after-capital deficits — even before heightened economic uncertainty related to tariffs,” S&P said in a statement Wednesday explaining the change.
S&P expects Quebec’s fiscal balances to improve over the next several years, but the picture may be complicated by a provincial election in 2026. The outlook for Quebec remains stable.
The province’s public sector debt was $351 billion (US$253 billion), or 58 per cent of gross domestic product, as of March 31, according to its budget documents. That includes debt of local governments, universities and Hydro-Quebec.
In March, Finance Minister Eric Girard released a budget plan that forecasts a $13.6 billion deficit for the 2025-2026 fiscal year — up from US$10.4 billion the previous year — and warned that the fiscal outlook depends on the duration and severity of the trade war. Those deficit figures include regular contributions to the province’s Generations Fund, which is meant for debt repayment.
The government plans to balance its budget by 2030 through a combination of tax changes, lower spending and economic growth. “We don’t expect these to have a meaningful impact in the next two years,” S&P said.
“The Minister of Finance acknowledges the decision and reiterates his commitment to sound management of public finances,” Quebec’s finance ministry said in a statement. “The government is also committed to reducing the debt burden for the benefit of future generations.”
As of March 31, the province had $16.8 billion in its Generations Fund, or 7.1 per cent of its net debt.
Melissa Shin, Bloomberg News
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