Quebec's fiscal outlook has strengthened ahead of the October provincial election, with the latest pre-election report showing improved budget and debt trajectories compared with the projections released in March, National Bank of Canada Capital Markets said in a Monday note.
However, the improved outlook doesn't necessarily create room for new spending commitments, said the bank. The province still faces a fiscal gap in the years ahead, while its relatively high debt burden and rising real borrowing costs point to a need for continued fiscal restraint.
"Restraint will be needed to ultimately return the budget to balance," wrote National Bank's Chief Rates and Public Sector Strategist Warren Lovely in Monday's note.
The economic outlook remains uncertain, particularly as ongoing US-Canada trade negotiations could introduce new risks, added the bank.
Quebec is expected to hold off on additional debt sales until the Oct. 5 election results are known, but the province is well positioned to do so, having already secured 69% of its funding needs for the fiscal year, said National Bank.