What happened: RBC economists predict B.C.’s economy will contract more than originally expected
Why it matters: The province was hit harder than most by job losses, but the West Coast economy is expected to outperform others by 2021
While economists at RBC say they’re bullish about British Columbia’s growth prospects for 2021, the same can’t be said for economic growth this year.
Senior economist Robert Hogue and economist Carrie Freestone said they're downgrading the province's growth forecast for the year based on "greater-than-expected labour market weakness to date."
Statistics Canada revealed last week B.C. added 15,300 jobs in August — "a pretty dramatic slowing," according to Ken Peacock, chief economist for the Business Council of B.C.
The latest outlook from the bank, released Thursday (September 10), now projects B.C.’s economy will contract on an annual basis by 5.6% this year.
That’s notably weaker than the 4.2% contraction the bank was predicting in June, but not quite as bad as the 6.7% contraction the provincial government predicts.
“Several factors have contributed to B.C.’s dropping in our rankings. First, B.C. experienced larger declines in employment than the national average, down 7.8% year-to-date. Currently, over one-third of British Columbians who lost their jobs during COVID-19 have yet to regain employment,” the outlook stated.
“Second, exports have fallen significantly in B.C. since the crisis hit. Forest product exports (B.C.’s top export category) are down 17% (as of July) in part reflecting housing starts in the Western U.S. lagging other regions. Coal mining exports have also fallen (-41%), as have oil and gas exports (-19%).”
But the RBC economists said they remain “relatively bullish on the province’s growth prospects next year with large capital investment projects poised to generate substantial activity.”
Major projects across the province include Site C dam construction, the Pattullo Bridge replacement, extensions to the SkyTrain network and development of LNG Canada’s facility in Kitimat.
The bank predicts the provincial economy will grow 4.9% next year, on par with its projection for the national economy as a whole.
Ontario is expected to lead the country with 5.2% growth in 2021, followed by Quebec at 5%.
“The good news is the worst of the shock is behind us—provided any future waves of the pandemic require a lighter containment touch than what was necessary to flatten the first wave,” the RBC outlook stated, referring to the 2020 economy.
“The labour market has started to recover. Consumers are spending again. The housing market has bounced back. In fact, the early phase of the recovery has been surprisingly strong in many provinces. We expect the pace to slow as the reopening effect fades, however.”