Exports will drive British Columbia’s economy in 2015 to reach its strongest growth rate since 2010, RBC said in its Provincial Outlook forecast released March 12.
B.C. will see real GDP growth of 3.1% this year – the second-highest rate of increase in Canada – due in part to the strong recovery in the American economy.
“Improved performance in the export sectors is expected to be led by an increase in U.S. demand in part reflecting the weaker Canadian dollar,” said RBC senior vice-president and chief economist Craig Wright.
“Homebuilding activity in the U.S. is anticipated to increase in 2015, as rising housing demand will be met with low inventory levels, which will likely produce positive effects for British Columbia's forestry exports.”
Nationally, RBC has downgraded its economic forecast by 0.3 percentage points, to 2.4% from 2.1% in December. The decrease is being led by falling oil prices, but the news isn’t all bad.
“Lower gasoline prices puts more money in the pockets of consumers; we estimate that the drop in oil and corresponding fall in gas prices will pump up consumer purchasing power by $11 billion in 2015,” Wright said.
“Consumption’s contribution to real GDP growth in 2015 will be boosted by 0.2 percentage points.”
The forecast for growth in Alberta has been downgraded significantly since RBC’s December 2014 forecast, from 2.8% to 0.6%. While falling oil prices are set to have “profound adverse repercussions” for the province’s energy sector, Alberta’s economy is strong enough to keep growing, however slowly.
The effects of Alberta’s relative weakness will have some positive results for B.C. The latter half of 2014 saw a drop in the number of British Columbians migrating to the oil-dependent province as job prospects have been slipping. The third quarter of 2014 saw net migration with Alberta hit positive territory for the first time in three years, and this trend will continue, RBC said.
B.C.’s population will grow at an accelerated rate this year, and this in turn will boost the province’s housing market to its highest rate since before the 2008 economic downturn.
While Alberta sees falling employment rates due to depressed energy prices, B.C. will experience increased consumer spending and growing household savings as a result of savings on gas.
While the outlook is positive for B.C., RBC said the province should remain cautiously optimistic. The provincial budget released February 17 didn’t say much about LNG, which was previously expected to form a cornerstone of the economy.
“Prospects for the yet-to-be-born industry were given a boost, however, by the federal government’s LNG tax initiative announcement on February 19, which may incentivize some proponents to commit to highly anticipated, final investment decisions in 2015,” RBC said in its report.
Ontario is forecast to have the highest real GDP growth in the country this year, at 3.3%. This would be the first time the province will have Canada’s highest growth since 2000. As with B.C., falling oil prices and the lower Canadian dollar will benefit the economy in Ontario as exports increase.