BC Economic Review & Outlook - Mid-Year Report - Amid External Headwinds, BC's Economy Is Holding Up Well

Against the backdrop of a choppy and risk-prone global economy and decelerating growth here in Canada, British Columbia is holding its own. As a small trade-oriented jurisdiction, the province is certainly not impervious to the economic headwinds, whether they blow globally or from within Canada. Sluggish commodity prices and the oil-driven recession unfolding in Alberta and Newfoundland are affecting all regions of Canada and have prompted us to trim our growth BC outlook relative to expectations back in January. However, by Canadian standards British Columbia looks well-positioned for a decent economic performance over the next 18-24 months.

Highlights

• The outlook for the global economy has been trimmed since early 2015, due to a slow start for the US economy, weaker growth in China and softer conditions in many other emerging market economies.
• Because of the setback in the first part of the year, the US economy is now projected to grow by 2.5% (much slower than forecasts at the outset of the year).
• The Canadian economy has been hit by the oil price slump and is now expected to expand by a tepid 1.1% to 1.5% (in its just released Monetary Policy Report, the Bank of Canada’s forecast was at the bottom end of that range).
• Against the backdrop of a slower global economy and subdued growth in Canada, economic activity here in BC is holding up reasonably well.
• In light of sluggish external conditions, we have downgraded our outlook for BC and now expect real GDP to climb by 2.4% this year (compared to our forecast of 2.6% in January).
• The depreciating Canadian dollar is helping to lift BC’s exports to the US. Tourism is also a bright spot in the provincial economy.
• BC’s economic growth rate should pick up to 3.1% in 2016, driven in part by early stage construction of at least one large LNG plant and an improving US economy.