Stronger today, momentum for tomorrow
A strong global recovery is underway. World economic output is expected to leap 6.9% in 2021. A similar sized 6.6% expansion is projected for the U.S. The Canadian economy is on course for a slightly more modest 6% increase in real GDP this year.
Closer to home, B.C. is benefitting from the robust global economic backdrop and is expected to post strong growth over the next couple of years. The Business Council’s mid-year B.C. Economic Review and Outlook expects B.C.’s economy to grow 5.8% in 2021. This recovery is particularly impressive considering B.C.’s COVID-induced downturn was milder than most other provinces thanks in part to elevated construction activity and a resilient export sector. Over the forecast horizon, B.C.’s merchandise exports will continue to benefit from the upswing in commodity markets and ongoing investment and construction in large capital projects. The full reopening of all consumer activities provides an additional lift through the end of the year and into 2022.
Improving the economic and investment environment for export-capable industries should be top of mind for policy makers as they continue to work on B.C.’s post-pandemic economic plan. Industries that generate export earnings, including our natural resources and as well as services sectors, play a critical role in sustaining prosperity and helping to generate family supporting jobs and government revenues.
The report also details the significant economic contributions of the province’s strengthening technology and professional services sectors. Policy makers need to recognize the expanding role of the broad advanced technology sector in the province’s economy. Talent and skills are the most vital inputs for businesses in these industries so government, post-secondary institutions and employers need to be aligned on a strategy to attract and retain qualified people.
Highlights
The global economy is projected to grow by a very robust 6.9% in 2021, followed by a 4.4% expansion in 2022.
Vaccination programs are expected to help achieve broad immunity to COVID-19 by: 2021Q3 in Canada; 2021Q4 in the United States and most other advanced economies and China, and 2022 in other emerging market economies.
Canadian GDP growth is expected to be 6.0% in 2021 and 4.6% in 2022.
Despite a significant amount of slack in the economy, CPI inflation in Canada is running close to 4% per annum, well above of the Bank of Canada’s 1-3% target range. The Bank attributes the rise in consumer inflation mostly to temporary supply-side factors, but higher inflation is a key risk to the outlook.
B.C.’s downturn was comparatively mild. B.C.’s economy is slated to grow 5.8% in 2021, an upward revision from our prior forecast. Growth moderates somewhat in subsequent years.
While soft spots remain, the provincial labour market is healing with overall employment now slightly above the pre-COVID level. Global trade is expanding and supporting the hefty upswing in B.C.’s merchandise exports. Tourism and the broader hospitality sectors are still recovering but are expected to benefit from pent-up demand as international travel gradually resumes.
Growth in the province’s technology and professional services sector accelerated during the pandemic. Policymakers need to recognize the expanding role of the of the broad advanced technology sector in the province’s economy. Talent and skills are the most vital inputs for businesses in these industries. Government, post-secondary institutions, and employers need to be aligned on attracting and retaining high-skill people.
The province’s export sector continues to underpin and lift economic growth in B.C. Attracting investment and supporting the expansion of export-capable industries should be a top-priority policymakers looking to foster a stronger and enduring economic recovery.
