Uncertainty continues to cloud British Columbia’s three-year economic and labour market outlook.
Even with a rebound and vaccination program underway, real gross domestic product (GDP) isn’t expected to return to pre-pandemic levels until 2022, according to B.C.’s Ministry of Finance.
Following an estimated 5.3% decline in real GDP last year, the province forecasts an increase of 4.4% this year. Growth is expected to wane over B.C.’s three-year fiscal plan, falling to a rate of 3.8% next year, and 2.2% in 2023-24.
The estimates for this year and next are half a percentage point below the average outlook provided by the province’s Economic Forecast Council as a measure of prudence. Later forecasts are 0.2 percentage points below that average.
“The pandemic will end. When it does, B.C. will be ready for the opportunities that come with recovery,” Selina Robinson said in her first budget speech as Minister of Finance.
B.C.’s first pandemic budget includes billions of dollars for new investments in healthcare, housing and capital projects.
It comes with a projected $9.7 billion deficit, $3.25 billion in pandemic and recovery contingencies and a 17.6% year-over-year increase in total debt.
Over B.C.’s fiscal plan, deficits are expected to shrink to $5.5 billion in 2022-23, and $4.3 billion in 2023-24.
Total debt is expected to increase by $24 billion. B.C.’s taxpayer-supported debt-to-GDP ratio is expected to rise to 26.9% in 2023-24, up from an estimated 20.3% last year.
Overall employment recovery is well underway in B.C., with 96% of B.C.’s pandemic-related job losses recovered as of February, and average hours worked back to 99.4% of pre-pandemic employment levels.
But despite optimism spurred by the approval and rollout of multiple COVID-19 vaccines, the budget notes that hard-hit sectors such as tourism, hospitality, recreation and retail will take longer to recover.
Year-to-date up to February, construction, accommodation and food services, and wholesale trade and retail reported “significant job losses,” collectively shedding 75,350 positions. Gains were led by professional, scientific and technical services (+29,800), public administration (+21,300) and healthcare and social assistance (+10,900).
“We have seen month after month of steady job gains, and British Columbia now has the best job recovery rate in Canada,” Robinson said. “That does not mean all jobs across all sectors have reappeared, but it is reason for cautious optimism.”
Employment is expected to increase by 4.7% this year, a gain of approximately 117,000 positions, followed by annual growth of 2.2% in 2022 that then moderates over the medium term, and slows to 1.3% by 2025.
A return to record-low unemployment is not expected over the next three years. The unemployment rate is estimated to average 7.5% this year, and gradually decline to 5.9% in 2025 – a full percentage point above B.C.’s rate at the end of 2019.
In February, lower female youth employment accounted for half of the gap between pre-pandemic and current employment levels. A third of those unemployed have been without work for at least 27 weeks, compared with 12.8% in February 2020. Long-term unemployment as a share of unemployment is at its highest level in 36 years.
As employment prospects improve, the budget anticipates consumer spending to pick up. That includes a 3.7% increase this year in real household consumption of goods and services, and in nominal retail sales.
Home sales are expected to increase 4.8% in 2021 before two years of projected declines – decreases of 5.1% in 2022 and 4.5% in 2023.
Consumer price inflation in B.C. is expected to be 1.7% this year, and 2% in 2022.
The budget assumes all British Columbians who are eligible for a COVID-19 vaccine and who choose to be vaccinated with receive one by September 2021.