The economy is getting bigger, but not much better
Vancouver, B.C. – February 5, 2020 - The Business Council of British Columbia (BCBC) has downgraded its forecast for the province’s economy in its latest B.C. Economic Review and Outlook
(BCERO) report. The Council now sees the province’s economy expanding by 2.0% (real GDP) in 2020, down from 2.2% in the previous forecast.
Key highlights include:
- The 2020 forecast for provincial growth has been downgraded to 2.0% from 2.2%;
- The B.C. job market softened over the last half of 2019. The crisis in forestry and very sluggish retail sales are contributing to a weakening employment outlook;
- Non-residential construction remains a bright spot for the B.C. economy, as are the technology, film and television, and professional, scientific and technical services sectors; and
- Canada’s GDP will increase by 1.6% in 2020, largely due to record high population growth. However, in per capita terms, the Canadian economy is barely growing at all and individuals and families are not much better off.
“Since the last B.C. Economic Review and Outlook, external factors have continued to play a role in the slowdown that’s evident in the provincial economy,” said Ken Peacock, Chief Economist at BCBC. “B.C.’s exports have declined, and the residential housing sector continues to adjust to policy changes in Canada and China over the last few years. We see growth in several sectors, but overall we look for softer growth in 2020.”
For the global economy, the Phase One trade agreement between the U.S. and China, greater clarity on Brexit, and the United States’ ratification of the USMCA suggest a slightly improved outlook. However, the seriousness of the novel coronavirus is increasing each day and, with China now the world’s second largest economy, it presents a downside risk for global economic activity.
“Looking to the medium- and longer-term, the principal constraint on Canada’s economy is home-grown,” said Dr. David Williams, BCBC’s Vice President of Policy. “Fully three-quarters of Canada’s recent GDP growth is due to increases in total hours worked, reflecting record high population growth. Productivity growth has contributed only one-quarter of recent GDP growth: the weakest contribution since the 1980s. Relying on growth in labour inputs rather than labour productivity, the result is that Canada is making little headway in raising real wages or GDP per person. These are the aspects of economic growth that Canadians should and do care about, not the absolute size of the economy. The evidence is that Canada’s economic growth strategy is not delivering higher real wages and living standards for Canadians over time.”
The B.C. economy remains in reasonable shape compared to most other provinces, but business investment, exports and productivity are not where we need them to be to achieve greater overall prosperity. As with Canada as a whole, rapid population growth – largely driven by immigration -- is an important factor behind GDP growth in British Columbia.
A notable bright spot is B.C.’s increasingly diverse industrial mix, with tourism, high technology, film and television, transportation services and other service exports all continuing to expand.
However, the province’s labour market is deteriorating. While B.C. experienced above average job growth in 2019 in annual terms, a closer look at the second half of the year reveals a downward trend. By December 2019, year-over-year job growth was only 0.3%. Employment is declining in both the goods and services sectors. The Business Council forecasts an uptick in the unemployment rate from 4.7% in 2019 to 4.9% in 2020.
The Business Council is troubled by the ongoing crisis in the B.C. forestry sector, including mill closures, job losses and the impact of the protracted labour dispute on Vancouver Island. The Council is also concerned about the province’s waning competitiveness, especially in the natural resource, manufacturing and transportation sectors that form the backbone of B.C.’s export economy. Through the first 11 months of 2019, the value of B.C.’s international merchandise exports dropped by 6.7% and we see further downside risk in 2020. The tax burden on business and industry has increased significantly in recent years, regulatory costs are mounting, and many areas of public policy affecting business have seen significant changes since 2015. The Council urges policymakers at all levels to focus more attention on ensuring the province is an appealing place for business investment, innovation, entrepreneurial activity, and job creation.
The next B.C. Economic Review and Outlook is scheduled for release in early April 2020.
To download the full BCERO, click here.
About the Business Council of British Columbia
Now in its 54th year as the premier business organization in British Columbia, the Business Council of B.C. is a non-partisan organization made up of more than 200 of the leading and largest companies, post-secondary institutions and industry organizations from across B.C.'s diverse economy. The Council produces high quality public policy research and advocacy to support a competitive economy for the benefit of all British Columbians.
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