VANCOUVER, June 25, 2009 – British Columbia has been
among the hardest-hit provinces during this recession, as what started
out as forestry-specific downturn eventually spread to the construction,
energy and consumer sectors, according to the Provincial Outlook report
from BMO Capital Markets Economics.
“Real GDP will likely contract 2.5 per cent this year, with the
prospects for recovery pointing to a slightly above-average 2.0 per cent
advance in 2010,<” said Robert Kavcic, Economist, BMO Capital Markets.
While housing markets
in Canada and the U.S. are showing signs of stabilizing, a significant
rebound
in construction activity is not expected in the
coming year, largely because of overbuilding during the last cycle. “Housing
starts in the province have plunged to levels last seen at the depths
of the downturns in the early 1980s and late 1990s, and while sales have
rebounded smartly thanks to improved affordability, further cooling by
the autumn is expected,” noted Kavcic.
Compounded by a weak U.S. housing market, the forestry sector will remain
under intense pressure. Meantime, low natural gas prices threaten to
weigh on activity in the energy sector despite an improved relative cost
versus Alberta. Indeed, the Province increased the amount of royalty
credits given out to natural gas producers (to build roads and infrastructure)
by 20 per cent to $120 million in 2009.
The impact of the
broad-based recession has also been felt in B.C.’s
labour market, where employment was down 2.5 per cent year-over-year
through May—among the worst declines in Canada. While construction
employment has seen the sharpest declines, down about 17 per cent from
its peak, service sector employment has stalled. “The
2010 Olympics should provide a boost to the labour market and retail
sales activity, but the strength will likely prove short-lived,” according
to Kavcic. “Indeed, most of the Olympics-related construction activity
is already at or near completion.”
The British Columbia
government is forecasting a $495 million deficit for fiscal 2009/10 – its
first foray into the red in six years after it amended its balanced
budget law. The Province will provide economic
support through infrastructure spending in a three-year, $20 billion
investment plan targeting transit, roads, schools and hospitals. A revised
post-election budget is expected on September 1, and a significant upward
revision to the deficit forecast is possible.
The complete report can be found at www.bmocm.com/economics.
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