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
June 12, 2023

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 released its 2023 budget on March 21, 2023, which points to a gradual improvement in the fiscal outlook and stabilization of the debt burden despite softening economic conditions. Québec forecasts a budget deficit of $1.6 billion for 2023–24, relatively unchanged from the prior year. On a DBRS Morningstar-adjusted basis, this equates to a shortfall of $6.1 billion, or 1.1% of GDP, after making adjustments to recognize capital spending as incurred and assuming the contingency reserve is not needed. Over the medium term, the Province projects gradually improving results, with a small surplus anticipated by 2025–26 and growing modestly thereafter. This equates to DBRS Morningstar-adjusted deficits of less than 1.0% through 2027–28. While new tax and spending measures have slowed the improvement in Québec's fiscal outlook, the Province maintains the flexibility to respond to challenges that may arise should growth prove to be weaker than anticipated.

The pace of debt reduction appears to be slowing but the outlook for DBRS Morningstar-adjusted debt-to-GDP is roughly in line with previous expectations. On a DBRS Morningstar-adjusted basis, the debt-to-GDP ratio is expected to stabilize around 45.0% or below from 2023–24 through 2027–28. In Budget 2023, Québec has established a new debt reduction objective that aims to reduce net debt-to-GDP to 30.0% by 2037–38, from 37.4% in 2022–23, or roughly in line with the current provincial average.

Like the rest of Canada, Québec's economic growth is expected to slow as global economic conditions deteriorate in response to central bank efforts to raise policy rates and curb inflation. The Province is forecasting real GDP growth of 0.6% for 2023, followed by 1.4% real GDP growth in 2024. Recent financial market instability and deteriorating credit conditions present downside risks to the outlook, while the evolving outlook for inflation and interest rates along with global geopolitical tensions present further uncertainty.

A positive rating action is dependent on further improvement in critical rating factors or sustained improvement in financial risk factors. A combination of a material erosion in economic fundamentals, sustained large operating deficits, and a significant increase in the debt-to-GDP ratio could result in a negative rating action, although this is unlikely.

There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

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 (May 17, 2022).

All figures are in Canadian dollars unless otherwise noted.

DBRS Morningstar applied the following principal methodology:
Rating Canadian Provincial and Territorial Governments (; April 28, 2023).

The following criteria has also been applied:
DBRS Morningstar Global Criteria: Guarantees and Other Forms of Support (; March 28, 2023).

The credit rating methodologies used in the analysis of this transaction can be found at:

A description of how DBRS Morningstar analyzes corporate finance transactions and how the methodologies are collectively applied can be found at:

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 [email protected].

The rating was not initiated at the request of the rated entity.

The rated entity or its related entities did participate in the rating process for this rating action.

DBRS Morningstar had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

This is a solicited credit rating.

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

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available on or contact us at [email protected].

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