Resources on the rise in B.C.

The 14-member independent B.C. Economic Forecast Council, for example, was unanimous this past December in forecasting much stronger growth in real gross domestic product (GDP) for B.C. over the next few years. This council is composed of economists from across the country. It meets twice a year with B.C.’s minister of finance to advise the province on its budget.

On average, members of the council pegged B.C.’s GDP growth in 2013 at 1.4%, followed by a far healthier 2.3% for 2014 and 2.7% in 2015. The council is calling for annual average real GDP growth in the 2016-18 period of 2.7%.

“The slow period is behind us,” says council member Helmut Pastrick, chief economist with Vancouver-based Central 1 Credit Union. “We’re in the transition to faster growth.”

Adds Jock Finlayson, chief economist with the Vancouver-based Business Council of British Columbia and a forecast council member: “The forecast [real] GDP growth for 2014 is sizable, and most of the [forecast] council’s economists see this growth accelerating when looking past 2014.”

However, there’s no question that a significant portion of B.C.’s recovery – especially beyond 2014 – rests on whether the proposed LNG industry is established. Creating such an industry for shipping LNG to Asia and elsewhere was a key plank in B.C. Liberal Premier Christy Clark’s successful election campaign this past spring. The industry is based on B.C.’s massive upstream natural gas reserves but also requires additional multibillion-dollar investments in pipelines and initial coastal LNG-processing infrastructure.

However, even though as many as 12 LNG projects are proposed, there are still no shovels in the ground. Still, says Finlayson, “LNG is very much a central focus for B.C.’s government, and we think this will be the year when we see at least one of these projects getting off the ground. And, if one goes ahead, obviously more will follow.”

Regardless of how the LNG story plays out, a stronger U.S. economy in 2014 bodes well for B.C. exporters. In fact, there were already signs of growth in B.C. exports last year, with activity in the nine months ended Sept. 30, 2013, up by 5.2% over the corresponding period in the previous year, says the B.C. government’s second-quarter (Q2) report.

According to a recent report on the economic outlook for B.C. by Craig Wright, senior vice president and chief economist with Royal Bank of Canada (RBC): “External demand for B.C.-made goods will be a key source of economic activity, and this will be especially true for B.C. resources industries such as forest products and mining and, to a lesser extent, manufacturing.”

The continued recovery in the U.S. home-building market and a lower Canadian dollar both will be particularly helpful to B.C., the report adds: “Not only will a lower Canadian dollar, coupled with a stronger U.S. economy, help our exporters, but the lower dollar will probably dampen cross-border shopping by British Columbians, which had been growing at a blistering pace.”

Next: A balanced budget?
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A balanced budget?

This brighter 2014 outlook will help the B.C. government keep its promise to deliver a balanced budget for fiscal 2013-14. The government’s Q2 report projects a $165-million surplus on revenue of $44.3 billion for the current fiscal year. The 2014-15 budget arrives on Feb. 18.

Finlayson adds: “Balancing the budget also will be tough, but it’s achievable.”

Meanwhile, RBC sees the B.C. unemployment rate being stuck at around 6.6%. Statistics Canada data for December 2013, in fact, also pegged B.C. unemployment at 6.6%, which is lower than the Canadian average of 7.2%. The RBC report also says B.C. retail sales should grow by 1.7% in 2013, then pull ahead by 3.8% and 3.6% in 2014 and 2015, respectively.

Housing starts, however, are forecast to decline steadily to 24,000 by 2015 from 26,500 in 2013. A new Royal LePage Real Estate Services Ltd. report, however, forecasts that sellers in the Vancouver area should see prices increasing robustly by an average of 4.4%, to $801,000.

As for the impact on jobs, a paper from the Business Council of British Columbia that looks ahead to 2014 says there was virtually no job growth in 2013, but that this is expected to change in 2014 – especially during the second half – to a moderate growth rate: “In particular, job growth in non-residential construction, infrastructure, transportation, energy and the natural resources sectors will lead the way.”

A forecast from Toronto-Dominion Bank has B.C. employment growth expanding from 0.1% in 2013 to 1.2% this year, and by 1.3% in 2015.

In other parts of the resources sector, economists say that lower global commodities prices will present challenges for the B.C. mining industry, but tourism and high-tech development will be assisted by the lower Canadian dollar and the recovering U.S. economy.

Despite the economic recovery in B.C., steady outmigration of workers – especially those with young families – from B.C. to Alberta and Saskatchewan will continue, Finlayson warns, and this could prove even more problematic because a recovering economy requires skilled labour.

“The high cost of living,” Finlayson says, “especially in the Lower Mainland and Greater Victoria, is pushing young British Columbians to the Prairies. And they’re also being pulled by higher wages – average wages in Saskatchewan are now higher than in B.C.”

Economists don’t foresee any major “made in B.C.” economic risks for 2014. However, global risks may still be a factor, Finlayson notes: “Beyond geopolitical risks, the biggest economic risk for B.C. is in the eurozone. If there’s further turbulence in Europe due to high national debts or further weaknesses in its banks, that will impact B.C. and other economies.”

British Columbia

Population: 4,581,978

GDP 2012 ($bil.): 220

gdp % change: +2.3

2013-14 surplus ($MIL.): 165

Estimated net debt ($bil.): 41.9

Median after-tax income, all families: $48,900

Household disposable income/capita: $30,474

Figures from latest available reports/estimates

Sources: conference board of canada;

Government reports

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