It won’t be the end of the world, but B.C.’s economy might be in for a more abrupt slowdown than earlier predicted.
For months, most of the country’s top economists have forecast provincial GDP growth to slow this year compared with 2011. The decline didn’t appear to be significant, given the conservative forecasts of 2011 GDP that ranged between 2% and 2.6%. But many were more than 0.5% below the 2.9% preliminary GDP growth Statistics Canada released last week.
A few dozen basis points here and there might not sound like a lot, but every 0.1% change in GDP equates to more than $150 million in economic output gained or lost. That equals the gain or loss of all the economic output of B.C.’s wineries last year ($151.4 million). Another 0.1% and you could lose the equivalent of the 2011 GDP of B.C.’s breweries ($180.2 million). Such a dry prospect of losing both would be painful indeed.
Current forecasts have B.C.’s economy growing this year from between 1.8% and 2.6% or between $2.8 billion and $4.1 billion. If the lower predictions come to fruition, it could result in a 35% deceleration of the economy from growth of $4.4 billion in 2011. Statistics Canada’s latest economic figures suggest that many sectors are already slowing down as national GDP unexpectedly fell 0.2% in February. Key B.C. sectors ranging from manufacturing and agriculture to mining, oil and gas and forestry posted declines.
The slowdown in China, continued economic problems in the U.S. and uncertainty over the global economic impacts of Europe’s sovereign financial problems have been cited as key contributors to the slowdown.
Sherry Cooper, chief economist at BMO Financial Group, told Business in Vancouver that those factors will continue to hurt the key sectors that contributed to B.C.’s growth last year: forestry, mining and construction.
Time appears to be the key variable in helping B.C.’s key export markets overcome their challenges in the current economic cycle. Business owners can’t just grab a pint and wait for the recovery, but with interest rates still near record lows, Cooper added her voice to the chorus suggesting now would be a good time for companies to tap available financing.
She admits that’s easier said than done, because certain types of capital like the public equity markets remain challenging to tap. But she echoed the familiar refrain that rates have nowhere to go but up. The only question is when. •
