Economic growth in most Canadian provinces, including B.C., will be lower than expected in 2012, TD Economics reports.
In a report issued Friday, TD Economics adjusted the predictions for growth that it made in September.
It now expects growth in all but two provinces to come in at less than 2% in 2012, and cites a housing market correction in Vancouver — which still "has room to run" – as one of the economic trends that could keep growth lower than expected in B.C. for the near term.
"After showing telltale signs of being significantly overvalued, British Columbia's key urban housing markets – and notably formerly red-hot Vancouver – appear to be going through a long-awaited correction," the report states.
"So far this year, resale prices in Greater Vancouver and Victoria have declined 7% and 11% respectively, and sales by 31% and 17%.
"We don't anticipate that the market will continue to decline in a straight line over the next few years."
The report's authors said a "modest reprieve" in the Vancouver housing market may well come in the second half of 2013.
Internationally, economic uncertainty in Europe, a slower-than-expected recovery in U.S. and slowing growth in China and emerging markets are all contributing to slower than expected growth in most parts of Canada.
"On the domestic front, households across the country have been exhibiting more caution than expected," the report states.
Only Alberta and Saskatchewan are expected to have growth of 3% in 2013. The report cites housing market conditions as one of the factors contributing to "regional growth gaps" between Alberta, Saskatchewan and Newfoundland and Labrador – all booming, due to resource industries – and the rest of Canada.
"Another differentiator for 2013-14 is the state of provincial finances," the report states. "Except for Saskatchewan, which is in a surplus position, all provinces are running deficits."
B.C.'s economic prospects look better in 2014, the report states, with GDP growth 1.9% in 2013 and 2.5% in 2014.
A gradual recovery of the U.S. housing market is expected to increase demand for B.C. lumber over the next few years.
"An expected – and long awaited – increase in natural gas prices in 2013 would also be beneficial, although they will remain below historical averages," the report states.
