The British Columbia economy is forecast for steady growth in 2023, despite slower economic growth in the near term.
As consistent with other jurisdictions, the B.C. economy is expected to see slower growth in 2023 due to global inflation and higher interest rates; however, the Economic Forecast Council predicts steady growth to resume in the medium term.
The council, a group of 13 private-sector forecasters, reports to the Finance Ministry to help guide a BC economic plan in preparation for Feb. 28’s provincial budget, to be delivered by Finance Minister Katrine Conroy.
The council predicted the economy in BC would grow 0.4% in 2023, which is slower growth than its January 2022 predictions of 2.7% for this year. However, real gross domestic product growth is then expected to pick up, with an increase of 1.6% in 2024, followed by gains of 2.3%, 2.3% and 2.1% in 2025, 2026 and 2027, respectively
The Finance Ministry also consulted with the Environmental, Social and Governance Advisory Council to explore how the province can continue to build a more inclusive, sustainable economy.
Discussions with the advisory councils included:
- global inflation and monetary policy impacts;
- government policies to stimulate investment and ensure shared prosperity;
- socioeconomic factors in B.C., such as inequality, Indigenous partnerships, and well-being;
- environment, climate change and the transition to a lower carbon economy;
- housing affordability and supply;
- labour market dynamics and immigration;
- opportunities for businesses to build on BC’s environmental, social and governance profile.
According to an analysis by TD Bank, the B.C. economy’s eight-year run of outgrowing the rest of Canada “looks to have run its course… although B.C. is still likely to record solid growth.”
In BC economy news, TD Bank notes that provincial finances are in good shape, with the government forecasting a $5.7 billion surplus this current fiscal year.
“Next year is shaping up to be a much different story, with B.C.’s expansion rate expected to slow more sharply than Canada as a whole. In response, labour demand is set to cool (and push up the unemployment rate), helping reduce the size of the imbalance in B.C.’s ultra-tight jobs market.”
The TD Bank’s cautious view is due to the fact that households in B.C. are the most highly indebted in the country.
“The Bank of Canada’s rate hiking campaign is thus likely to take a larger toll on household spending. We’ve already seen some traces of this, as inflation-adjusted retail spending has fallen about 4% so far this year, versus the 2% gain managed for Canada overall. However, some offset will come through measures taken by the province to counteract the impact of inflation on household budgets.”
The drop in BC’s short-term forecast aligns with trends in other jurisdictions and is attributed to ongoing worldwide inflation as well as interest rates increasing at a higher and more rapid pace than initially anticipated within Canada.
According to the Business Development Bank of Canada, the consensus is that the economy will cool in 2023.
The slowdown is caused by the Bank of Canada’s fight against inflation. However, the Business Development Bank sees uncertainty about how the economy will respond to tighter monetary policy.
The bank predicts that 2023–24 gross domestic product growth nationwide will be below it’s 2.0% estimate by the Bank of Canada.
“Our most plausible scenario is the Canadian GDP growing by 0.5% in 2023, with one or two negative quarters here and there,” said Pierre Cléroux, Vice President, Research and Chief Economist with the Business Development Bank.
The Business Development Bank notes that usually an economic downturn is accompanied by increased unemployment. However, Canada continues to face labour shortages and had almost a million job vacancies as of September 2022, so “the impact of the downturn on the job market will simply be less pronounced than during similar periods in the past.”
Published on February 17, 2023.