B.C. businesses tied to commodities, tourism and events will be bearing the brunt of the COVID-19 fallout from the outset, according to the chief economist of the Business Development Bank of Canada (BDC).
“The good news in British Columbia is the economy is already running very well. So it’s better when you have a shock like this to do it from a good start than doing it from a weak economy,” Pierre Cleroux told Business in Vancouver shortly before Prime Minister Justin Trudeau announced sweeping measures to fight the novel coronavirus Friday (March 12).
The BDC’s latest economic forecast, released in January, pegged B.C. and Quebec as leading economic growth among the provinces.
But on March 12 the Business Council of B.C. downgraded projections for the province’s economic growth to between 1.3% and 1.5%, down its February projection of 2%.
Both forecasts were made before the full extent of COVID-19 were known.
“Typically those shocks, when it’s a virus, it’s not like a financial crisis. It’s much more short-term, it’s much more temporary,” Cleroux said.
He pointed to the smaller-scale 2002 SARS scare in Toronto, which saw the economy bounce back relatively quickly.
And while mining, forestry and tourism will be taking a hit in B.C., Cleroux said major infrastructure projects in the province, such as the $40-billion LNG Canada facility in Kitimat, won’t be throttled.
“I’m confident British Columbia is not going to experience a recession, even with the virus,” the economist said.
But Cleroux added it’s imperative for small businesses to review the status of their supply chains to ensure they can minimize interruptions, build a business plan that covers everything from employee travel to working from home, and take measures to protect cash flow.
“When you have a slowdown in the economy, even if it’s temporary, you have a lot of stress on your cash flow. Less revenue, higher costs. So a lot of small businesses are squeezed in that scenario,” he said, adding he believes the Bank of Canada will have to cut rates again to make capital easier to come by.
But even if the central bank cuts its key rate for the second time this year — a measure that would bring down mortgage rates — it’s not a given that B.C.’s real estate sector would suddenly explode with activity.
“I imagine people won’t make investments in the next few months but it’s going to come back,” he said.
“The thing with the virus is it’s not going to last for years.”