(Adds context from budget, comments from finance minister)
QUEBEC CITY, Quebec, March 10 (Reuters) - The Canadian province of Quebec said on Tuesday it would balance its books in the 2020-21 fiscal year, while boosting spending to stimulate the economy and pay down debt even as it faces uncertainty from the coronavirus outbreak.
The Coalition Avenir Quebec (CAQ) government also announced a budget surplus of C$1.9 billion ($1.38 billion) for the 2019-20 fiscal year, despite increased spending and an estimated C$600 million loss on an investment in a former Bombardier jetliner.
Quebec had forecast a C$1.4 billion surplus for fiscal 2019-20 in November.
Canada’s second most populous province has been using budget surpluses driven by a strong economy to pay down debt.
But across Canada, the country’s economic resilience could be tested this year by the coronavirus outbreak, with the Bank of Canada slashing the overnight rate earlier this month to help tackle the effects of the virus, also known as COVID-19.
Quebec Finance Minister Eric Girard announced a 5% rise in program spending in the C$119 billion budget for fiscal 2020-21. Current spending on efforts to combat climate change would roughly double to C$1 billion a year over six years from January 2021 through March 2026.
“Our budget will stimulate the economy,” Girard told reporters in Quebec City.
Quebec’s forecast of a 2% increase in GDP growth for 2020 was made before recent market turmoil surrounding coronavirus, and is up from the 1.5 percent rise in economic growth Girard previously expected.
Girard said the culmination of major trade deals boosted growth expectations for 2020. Quebec’s economy also grew 2.8% in 2019, compared with 1.6% GDP growth for Canada as a whole.
“Before coronavirus, we had some good news,” he said. The impact of coronavirus could potentially lower Quebec’s 2020 economic growth to 1.75%, he said.
Quebec, which has a C$14 billion reserve fund, can accelerate spending if needed on coronavirus.
“All the money that is necessary for fighting the health aspect of the virus is going to be there,” he said.
Quebec is expected to break even during the 2020-21 fiscal year, after putting C$2.7 billion into a debt-fighting fund.
Quebec’s net debt burden as a percentage of GDP is expected to decrease to 37% in 2020 and to 33% in 2025, compared with the Canadian provincial average of 30.2%.
Quebec will initiate a “reflection process” focused on setting a new debt reduction target, the government said.
$1=1.3750 Canadian dollars Reporting by Allison Lampert in Quebec City Editing by Leslie Adler and Tom Brown