Quebec government debt escapes another downgrade

Quebec has escaped another downgrade, as DBRS maintains its rating on the province’s debt.

On Tuesday, the Toronto-based firm reiterated its AA rating with a stable outlook, indicating that the agency considers the risk on Quebec’s long-term debt to be low.

The decision comes nearly two months after Standard & Poor’s (S&P) decided to lower its rating on Quebec’s debt for the first time since 1993, when Robert Bourassa was premier.

S&P had lowered its rating from AA- to A+ with a stable outlook. An A+ rating means that the agency considers the Quebec government to have a strong capacity to meet its financial commitments to its creditors, but with slightly more risk than with an AA- rating.

Like S&P, DBRS believes the trade war will put pressure on public finances, but considers that Quebec has the means to limit the damage.

“The reduced pace of spending growth, the commitment to return to a balanced budget and the province’s diversified economy give us confidence that Quebec can minimize the deterioration in public finances,” DBRS explained in a press release.

DBRS believes the deficit will represent 2.8 per cent of gross domestic product (GDP) in fiscal 2025-26. It anticipates the deficit will “gradually” decline to 0.4 per cent in 2029-30, the year in which the government aims to achieve a balanced budget.

For its part, S&P was more skeptical about Quebec’s ability to turn things around, particularly in view of the 2026 election deadline, which will prompt the main parties to make new electoral promises.

S&P had attributed its decision to a series of factors, including slowing population growth, rising government employee salaries and declining revenues. Economic uncertainty added to this difficult context.

–This report by La Presse Canadienne was translated by CityNews