The future continues to look bright for British Columbia. A strengthening U.S. economy, as well as a low Canadian dollar (C$), are pushing B.C. into the top ranks for the second consecutive year, says Jock Finlayson, executive vice president and chief policy officer of the Business Council of B.C. The province even may hang onto to its top-tier position in 2017.
“At a time when Canada’s economy is being pummelled by a deep slump in global oil and metals prices, B.C. is holding its own,” says Finlayson.
And the independent Economic Forecast Council stated recently that B.C. should continue to see “stable growth” despite ongoing global volatility. The council is a 13-member group of independent economists from across Canada who meet annually to advise B.C.’s government on its provincial budget.
For 2016, the council expects B.C. to outperform the rest of Canada. On average, council members are calling for an annual increase in B.C.’s gross domestic product (GDP) to be 2.5% for 2015, 2.8% in 2016 and 2.6% in 2017.
Royal Bank of Canada‘s (RBC) outlook for the province calls for B.C. to lead the country, with a provincial GDP growth rate of 3.1% in 2016. The RBC report also foresees B.C. holding the top spot in 2017, at 2.9% growth.
According to the RBC report: “Firm export growth should provide an anchor for [B.C.] economic activity in 2016, as the U.S. economy is poised to strengthen further and the tailwinds from the low Canadian dollar are set to persist.”
In particular, B.C.’s lumber industry should reap benefits from growth in U.S. housing starts, which will grow to an estimated 1.25 million this year from 1.1 million in 2015, says Helmut Pastrick, chief economist at Central 1 Credit Union.
“U.S. growth should be positive for B.C.’s lumber industry,” he says. “But, overall, the external environment [in other regions] still remains tumultuous.”
Pastrick also notes that because of the unstable external economic environment, Central 1 recently cut its outlook for 2016 to 3.1% from 3.3%: “We also lowered our forecast for the Canadian dollar. Right now, we’re being rather weak in expecting an annual average of our dollar this year of around US71¢. But I think in the short term, [the exchange rate] will drop lower. Oil prices have not found a bottom yet and the U.S. dollar is strengthening.” Patrick also predicts that interest rates will remain low this year.
Meanwhile, the provincial government’s most recent quarterly report states the province’s yearend government surplus in fiscal 2015-16 is projected to be $265 million, down slightly from the first quarter. Taxpayer-supported debt for the fiscal year is forecast to be $42.1 billion, or $204 million lower than in the first quarter.
“We’re still on a solid footing because we’re sticking to our prudent plan,” states B.C.’s finance ministry’s second-quarter report. “We’re cautious because of the volatility in domestic and global economies, but, overall, B.C. is showing steady economic growth.”
Victoria will update B.C.’s quarterly numbers and outlook for the 2016-17 fiscal year when its Budget 2016 is presented on Feb. 16. Unlike previous budgets under Premier Christy Clark, however, this one may open some government purse strings as the next provincial election, in early 2017, draws near.
“Today, B.C. is a leader in Canada, with a growing and diverse economy, a balanced budget and a triple-A credit rating. We have a plan to return dividends to British Columbians through investments in infrastructure, health care, education and more,” Clark said during her recent announcement of two byelections.
Thus far, Clark has not said her government would entertain deficit financing for infrastructure spending, as Prime Minister Justin Trudeau did in last autumn’s federal election.
Finally, housing in B.C. is expected to continue its very robust growth, even though prices in Metro Vancouver are at stratospheric levels.
“People want to live here, and there’s a land shortage. So, prices in the Lower Mainland will rise further,” Pastrick says. B.C. 2015 housing starts to October 31 rose by 12.6% to 31,400 annualized units over the same period in 2014.
The low C$ will continue to push already strong tourism in the province, according to an economic forecast from Toronto-Dominion Bank: “Tourism activity is expected to continue to record solid gains based on a weaker loonie and our expectation of stronger incomes stateside.”
Increased tourism is helping retail sales growth in B.C., which the RBC report anticipates will reach 6.8% when final figures for 2015 are tallied.
Although B.C. led Canada in job growth in 2015, at a rate of 2.3%, the province’s labour force participation rate is surging close to a three-year high.
The RBC report states that employment gains are expected to be sufficient to push the unemployment rate down to 5.8% in 2016 from 6.0% in 2015: “The flow of individuals moving back from neighbouring Alberta will likely continue to remain elevated. [Furthermore], anticipated strengthening in economic activity in the U.S. in 2016 and a modest recovery in commodity prices underpin our expectation that export-oriented sectors will improve.”
BRITISH COLUMBIA
Population: 4,681,500
GDP, 2014 ($bil.): 237.2
GDP, % change: 4.7
2015-16 surplus ($mil.): 265
Estimated net debt ($bil.): 42
per capita wage growth, % change, 2015: 3.2
Household disposable income, per capita: $33,402
Figures from latest available reports/estimates
Sources: Conference Board of Canada; Province
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