The nation-leading economic growth that British Columbians enjoyed over the past few years is forecast to slip slightly in 2017. Still, British Columbia is expected to remain among the top provincial performers.
Notes Helmut Pastrick, chief economist with Vancouver-based Central 1 Credit Union: “It’s possible that B.C.’s growth rate won’t lead the country again this year, but [the economy] still should be moderately strong.
“There’s a lot more external economic uncertainty in 2017 than there was at this time last year,” he adds. “And, typically, external factors can play a very large role in B.C.’s economic performance.”
Central 1’s outlook for 2017 calls for growth in real gross domestic product (GDP) of 2.7%, compared with a nation-leading forecast of 3.5% in 2016. According to Statistics Canada, B.C.’s economy grew by 3.3% in 2015, which was the highest rate among the provinces for the fourth consecutive year. Final figures for 2016 have yet to be tabulated, but B.C. is expected to turn in another top rate.
B.C.’s independent Economic Forecast Council, composed of 14 top economists, also states it expects the province to outperform other provinces again in 2017. On average, members of the council forecast 3% growth in 2016, 2.3% in 2017 and 2.3% in 2018.
“There still are some strong positives for B.C.’s economy this year,” Pastrick, a council member, notes. “The Canadian dollar should remain low, our exports are doing reasonably well, tourism numbers still are rising, interest rates are low and B.C.’s jobs growth was very good in 2016, although that is likely to slow somewhat in 2017.”
Adds Pastrick: “This means that income growth is quite substantial, which bodes well for consumer spending in 2017.”
Houston-based Kinder Morgan Inc.’s recently approved Trans Mountain oil pipeline from Edmonton to Burnaby, B.C., should have a 20-year, $19-billion impact on B.C.’s GDP and generate $2.2 billion in provincial and municipal government revenue, states the Business Council of B.C.
The province’s public finances also remain solid. The most recent update on fiscal 2016/17, released in late November by the Liberal government of Premier Christy Clark forecasts a budget surplus of $2.2 billion for fiscal 2016-17. That is up substantially from the $264 million surplus that was forecast in the 2016 budget released last February.
The latest quarterly report also calls for government revenue to increase by $372 million to $50.9 billion, thanks to further improvements in personal income tax revenue and a decline in the province’s taxpayer-supported debt, which fell by $2.1 billion.
With the government’s debt/GDP ratio at 15.8%, the government states it now borrows only to build capital projects.
According to economic outlooks from some of the big six banks, B.C is one of the few provinces that is forecasting a budget surplus for the current fiscal year, which ends on March 31, 2017.
In fact, Toronto-based Bank of Montreal‘s (BMO) provincial outlook states B.C. is the only province that has maintained a AAA-rating from both Moody’s Investor Service Inc. (also of Toronto) and New York-based Standard & Poors Financial Services LLC.
“All told, British Columbia is a rare bright spot on the provincial fiscal landscape right now, with a balanced budget and a declining debt burden,” the BMO report states. It calls for B.C.’s GDP to grow by 2.5% this year.
BMO’s job growth rate forecast for the province is 1.5% in 2017. That would lead the country, as does BMO’s forecast of 5.5% for unemployment.
“However, there are certainly some downsides for B.C. this year,” Pastrick notes. “Softwood lumber is a risk and we’re not sure how it will play out.”
The 2006 Softwood Lumber Agreement is up for renegotiation this year and, with the protectionist-leaning Donald Trump now in the White House, any new deal on export lumber is likely to be more restrictive for B.C., Canada’s top softwood exporter.
“One of our other concerns this year relates to the housing industry, in which we may end up with fewer housing starts,” Pastrick said. “As a result, the residential housing component may pull down B.C.’s overall GDP rate.”
Adds economist Jock Finlayson, executive vice president and chief policy officer with the Business Council of B.C.: “The province’s formerly frenetic housing market is losing momentum as home sales, led by weak numbers on the Lower Mainland, dropped sharply in the second half of 2016. Tighter mortgage regulations and higher mortgage rates also will dampen sales activity and put downward pressure on home prices.”
The B.C. government’s much touted entry into the liquefied natural gas (LNG) export industry, which Premier Clark has been promoting as B.C.’s next major economic leap forward, also has lost much of its lustre due to global LNG oversupply and lower prices.
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