Press Release

DBRS Morningstar Confirms the Province of Québec at AA (low) and R-1 (middle), Stable Trends

Sub-Sovereign Governments, Utilities & Independent Power, Other Government Related Entities
July 13, 2021

DBRS Limited (DBRS Morningstar) confirmed the Issuer Rating and Long-Term Debt rating of the Province of Québec (Québec or the Province) at AA (low) as well as its Short-Term Debt rating at R-1 (middle). Concurrently, DBRS Morningstar confirmed the Guaranteed Long-Term Debt and Commercial Paper ratings of Hydro-Québec at AA (low) and R-1 (middle), respectively, as well as the Long-Term Debt and Short-Term Debt ratings of Financement-Québec at AA (low) and R-1 (middle), respectively. The trend on all ratings is Stable.

Québec, like all other Canadian provinces, remains focused on efforts to combat the Coronavirus Disease (COVID-19) pandemic. However, Québec entered this downturn from a position of fiscal and economic strength and, as a result, projected deficits are expected to be manageable and debt-to-GDP will remain below prior peaks.

For 2021–22, the Province is forecasting a shortfall of $9.2 billion before contributions to the Generations Fund. On a DBRS Morningstar-adjusted basis, this equates to a shortfall of $12.7 billion, or 2.7% of GDP, after making adjustments to recognize capital spending as incurred and assuming the contingency reserve is not needed.

The 2021 budget points to restoring fiscal balance by 2027–28 after including contributions to the Generations Fund. However, on a public accounts basis, this means returning to a near-balanced position by 2024–25. Deficits are expected to fall steadily as the economy recovers—approaching 1.0% of GDP (DBRS Morningstar-adjusted)—which is likely to leave Québec in a strong fiscal position relative to its provincial peers. Furthermore, DBRS Morningstar believes the budget outlook has improved markedly since it was first introduced in March 2021 because of a stronger hand-off from 2020–21, faster-than-anticipated economic recovery, and potential for increased federal transfers. As such, DBRS Morningstar expects the fall update to show material positive revisions to the fiscal outlook.

DBRS Morningstar-adjusted debt (including unfunded pension liabilities, municipal debt subsidized by the Province, and loan guarantees, net of the Generations Fund) is estimated to have increased by $20.4 billion to $236.4 billion. As a share of GDP, the debt burden is estimated to have reached 53.5% in 2020–21. This is slightly lower than 54.0%, which DBRS Morningstar anticipated when it last confirmed Québec's ratings in July 2020. As one-time fiscal measures lapse and the economy steadily recovers, debt-to-GDP is expected to improve to approximately 52.9% in 2021–22 and toward 50.0% by 2025–26. This remains well below the peak of 58.4% in 2013–14.

The Province forecasts real GDP to grow by 4.2% in 2021 and 4.0% in 2022. These figures appear to be relatively conservative in relation to the private-sector consensus, which has been buoyed by stronger growth expectations for Canada as a whole as well as the United States.

The Province is solidly placed in the current rating category. A combination of a material erosion in economic fundamentals, sustained large operating deficits, and a significant increase in the debt-to-GDP ratio beyond current levels could result in a negative rating action, although this is unlikely. A positive rating action is also unlikely as the critical rating factors remain well anchored and debt-to-GDP remains relatively high.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at

All figures are in Canadian dollars unless otherwise noted.

The principal methodologies are Rating Canadian Provincial and Territorial Governments (May 3, 2021, and DBRS Morningstar Criteria: Guarantees and Other Forms of Support (May 31, 2021,, which can be found on under Methodologies & Criteria. Other applicable methodologies include the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (February 3, 2021,

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release:

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at

The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS Morningstar trends and ratings are under regular surveillance.

DBRS Morningstar will publish a full report shortly that will provide additional analytical detail on this rating action. If you are interested in receiving this report, contact us at

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