Advertisement

Quebec’s economic prospects brighten as Liberals take helm

WATCH: What does the Quebec election mean for the rest of the country? 

If there’s one thing financial markets and business folks prize, it is certainty.

Both awoke Tuesday certain to like the outcome of Quebec’s provincial election, which saw the Liberals clobber the Parti Quebecois to take a majority in the National Assembly.

“From a financial market perspective, last night’s result is likely to be well received,” TD Economics said in a note.

“It fully removes from the table the risk of another sovereignty referendum in the province, at least over the next four years.

“Furthermore, the election of a strong majority government increases certainty surrounding government policy since budgets and other key legislation can be passed without support from opposition parties.”

Story continues below advertisement

Experts over at Bank of Montreal went further.

“Suffice it to say that the sovereignty issue was all but put to bed last night,” economist Robert Kavcic said.

READ MORE: Complete coverage – Decision Quebec 2014

With the threat of a distracting PQ-driven secession referendum snuffed out, the business of running the province – and kick-starting Quebec’s lacklustre economy into gear – can resume, experts say.

Quebec’s economy is expected to lag behind others this year and next. The province is facing a $2.5 billion budgetary deficit and yawning net debt burden.

Rookie Premier Philippe Couillard will have to balance the need to stimulate growth against the equally important task of lower government expenditures.

The Liberals have pledged to create a quarter-million jobs over the next half decade – a clip that far exceeds the meagre 30,000 the province created over the previous five, while upping infrastructure spending.

A new home renovation tax credit touted on the campaign trail may help inject some spending into a stalling residential market in Montreal and elsewhere.

Home price gains in the province’s biggest city are slowing and are far below the pace of growth in red hot markets further west. Prices for the city’s condo market slipped 0.1 per cent through the first three months of year, Royal LePage said Tuesday.

Story continues below advertisement

Still, sentiment on Tuesday had turned decidedly more optimistic.

A Liberal win “returns some political stability back to Quebec, which is a clear positive for the flagging economy,” BMO’s Kavcic said.

Forecasts for growth and job creation haven’t been revised because of the election. GDP growth is pegged at below 2.0 per cent this year, and about 2.3 per cent in 2015 – both figures trailing expected growth in Ontario and Western Canada.

“We have not adjusted our forecast based on this election result. That said, to the extent that business and investor confidence in the province improves, the risks surrounding our call appear to have tilted to the upside,” TD economist Sonny Scarfone said.

Quebec’s banks stand to get a bump from the results, too, something that will have a direct effect on their ability to lend money and generally contribute to the provincial economy.

John Aiken, a banking analyst at Barclays said National Bank and Laurentian Bank – which do much if not most of their business in Quebec – have done well in the months following a separatist defeat in other elections, as savings from relieved customers flow back into accounts and business investment picks up.

Evidence of the higher optimism stemming from the election was visible in the loonie on Tuesday, which surged to its highest levels in weeks following the results.

Story continues below advertisement

The dollar moved more than a quarter of a cent higher on Tuesday to touch 91.5 cents US – a value last seen in mid-February.

WATCH: Pauline Marois announces intentions to step down following election defeat

Sponsored content