Navigating the Slowdown
Highlights
Global GDP growth is expected to be 3.0% in 2023, 2.5% in 2024 and 2.7% in 2025, well below the 2000-19 average of 3.8% per annum. The slowdown principally reflects the lagged effects of tighter monetary policy. Near-term momentum in the U.S. economy and highly favourable trade prices are two bright spots for Canada and B.C.
Canada’s GDP growth is expected to be weak at only 1.0% in 2023, 0.8% in 2024 and 2.4% in 2025. Population growth keeps Canada out of recession but masks serious weakness as the country faces a sustained step-down in living standards.
Looking through the veneer of red-hot population growth, the economy is shrinking. GDP per capita is expected to fall sharply by 1.8% in 2023 and another 1.0% in 2024. It will barely begin to recover in 2025. We estimate Canada will not recover its pre-pandemic (2019) level of real GDP per capita – unlike almost all other advanced countries – until at least 2027. Risks are to the downside as the spectacular $450 billion mortgage boom of 2020-23 unwinds amid higher interest rates.
B.C.’s economy is forecast to grow just 0.7% in 2024 and by a stronger but still below average 1.6% in 2025. B.C. avoids slipping into a technical recession, but real per capita income (GDP) declines significantly in both years.
B.C. job growth slowed to 1.5% in 2023, the slowest of any province. The number of employees in the private sector declined 0.2%. B.C. is unique in this regard with all other provinces registering strong gains in private sector employment last year.
Soft hiring conditions in the private sector have been evident for some time. Since 2019 the number of employees in B.C.’s private sector has barely edged higher. The only reason overall employment has grown since 2019 is because of the sharp increase in public sector employment.
As several large multi-billion capital projects move into the final building stages, related construction activity winds down and is a drag on provincial growth over the two-year forecast horizon. Non-residential private sector capital investment in other areas remains weak. Non-residential building construction in the public sector rises through 2025 and contributes to B.C.’s modest expansion.
Growth prospects are dampened by the weaker global backdrop and mixed outlook for B.C.’s export sector. Forestry exports have trended steadily lower since 2015 and recent provincial policy changes curtailing fibre supply will result in further reductions in production and more job losses. Education exports (students coming to B.C.) will ease as the federal government recalibrates its non-permanent resident immigration policies. Several mining projects are set to proceed and global demand for copper and other B.C. minerals is strong. Mining and tourism and film and television are bright spots.
Near record population growth underpins much of the province’s top line economic expansion. The shift to a net outflow of interprovincial migrants is significant in that it reflects British Columbians moving to Alberta for better opportunities and lower cost housing. The outflow however is not sufficient to dampen overall population growth with more than 180,000 international migrants settling in the province.
