Thankfully for the economy, foreign investor interest toward Quebec remains healthy.
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Quebec faces a sluggish economic year ahead as activity continues to cool off amid persistent inflation and elevated interest rates, Economy Minister Pierre Fitzgibbon says.
Real gross domestic product shrank 0.2 per cent in the third quarter, following the 0.4 per cent decline that was recorded for the April-June period, Quebec’s statistics institute said last week. Economists often speak of a technical recession when real GDP declines for two consecutive quarters.
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“On a macro level, we’re seeing a slowdown,” Fitzgibbon told the Gazette in a recent interview. “We’re going to have headwinds for at least another year. The macroeconomic context is difficult.”
The deceleration is already having an impact on the labour market. Job vacancies in Quebec plunged by about 29 per cent in the third quarter compared with a year earlier, the provincial statistics institute said Dec. 20. This pushed Quebec’s job vacancy rate down to 4.3 per cent from 6.1 per cent a year earlier.
Vacancies in the fourth quarter could be even lower. Unemployment in the province rose to 5.2 per cent in November from 4.9 per cent in October, Statistics Canada said this month. That compares with the record low of 3.9 per cent, which was reached in January.
“One has to admit that the relationship between employees and employers today is healthier than when unemployment was below four per cent,” Fitzgibbon said. “There’s a better balance between supply and demand.”
Public finances, too, are feeling the effects of the slower growth — to the point where Fitzgibbon indicated spending cutbacks could eventually become necessary.
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“We are seeing government deficits grow, and ours is not immunized,” he said. “Mr. (Eric) Girard has been open about this. The deficit could be bigger than expected. The room to manoeuvre is no longer there. It’s clear there will be an impact on budget control. I don’t think we’re going to go into austerity mode, but we are going to need to control spending, like companies do.”
Thankfully for the economy, foreign investor interest toward Quebec remains healthy.
Foreign direct investment in Quebec jumped 30 per cent in the fiscal year ended March 31 to a record $6 billion — and Fitzgibbon insists there are many more projects in the pipeline.
Outgoing Investissement Québec chief executive Guy LeBlanc suggested last month that investments in the battery industry could double over the next few years to reach $30 billion.
“We’re lucky that in electric batteries, in aluminium and iron ore, some projects are in motion and haven’t been deployed yet,” Fitzgibbon said, without naming the investors. “For foreign direct investments in 2024, I expect us to show substantial numbers based on the projects that we’re going to be announcing soon. We have momentum.”
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Fitzgibbon, who played a key role in helping Quebec land Northvolt’s $7-billion electric battery plant, is dismayed by the criticism levelled at the Swedish company’s project — whether from pro-environment groups who worry about the impact that construction will have on local flora and fauna, or from opposition parties who think the financial risk of the government’s involvement is too great.
“I vehemently object to the negativism surrounding Northvolt,” Fitzgibbon said. “This is a very good project. A minority of people are barking, but most taxpayers are happy. The battery file is a project that is going to transform the Quebec economy. It’s easy to criticize. There is a certain ‘wokism’ in Quebec but you have to be careful. The paradox is that this project fits perfectly within the Quebec strategy to decarbonize the economy.”
Some Quebecers, the minister added, “would rather see no industrial growth. I have people who write to tell me not to give companies any megawatts. I understand that industrial development can be disturbing for a community, but you must look at the big picture. The mission of the state is to create wealth, to redistribute it.”
Located in the South Shore towns of St-Basile-le-Grand and McMasterville, Northvolt’s first North American facility will initially focus on making batteries for electric cars and heavy vehicles. It’s scheduled to be fully operational by 2026.
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