June 18, 2020 (Vancouver, B.C.) – The Business Council of British Columbia (BCBC) has issued its Q2 2020 B.C. Economic Review and Outlook (BCERO) that contains a sobering assessment of the damage that the COVID-19 shutdown has reaped on the world and Canadian economies, with the B.C. economy slipping into a deep recession.
In late March 2020, the Council released its preliminary assessment of the potential economic impact of the COVIV-19 pandemic on the B.C. economy based on two potential scenarios for the length of the widespread closing of non-essential B.C. businesses. With the phased re-opening of B.C. industries and sectors, the Council has updated its projections.
The Council is now forecasting a 7.8% contraction in provincial gross domestic product (GDP) in 2020. This is down from our “better case” scenario from March, which projected a 7.3% decline. However, we also believe that a 10% to 12% contraction that we postulated under a “worse case” scenario is unlikely. In 2021, as the the global economy emerges from the deepest downturn in 100 years, BCBC expects a partial recovery in the level of provincial GDP by 4.8%.
The domestic economy will struggle to regain its footing and the B.C. export sector will be slammed by the steep global recession that is unfolding. Weaker demand and commodity prices for most of the province’s key export products are weighing heavily on this year’s growth. Export prospects are expected to be broadly better next year.
“B.C.’s commodity exports slowed through much of 2019. The impact of February’s protester blockades and then the COVID-19 shutdown have further curtailed international exports,” said Ken Peacock, Chief Economist and Vice President. “Over the first four months of this year, merchandise exports are down 15% compared to the same period last year. Furthermore, service exports such as tourism and film production, after serving as some of the province’s leading economic growth engines, have collapsed.”
The magnitude of job losses is especially concerning. Since February, the number of people working in the province has plummeted by approximately 350,000, with 95% of those jobs lost in the private sector. Young people have also been disproportionately affected by layoffs. Total employment is currently down 14% since February, and the number of jobs for people aged 15-24 years has plummeted by 34%. The unemployment rate for this group has soared to 29%.
B.C.’s greater exposure to hard-hit sectors (especially accommodation and food services, and wholesale and retail trade) contributed to the provincial unemployment rate nearly tripling in three months and now sits around 13%.
“As the shutdown is lifted, employment will rebound significantly,” said Mr. Peacock. “But the process will be uneven and slow. Many businesses will not re-open, while others will pivot toward digital business models with more automation, and we expect that tens of thousands of jobs will be permanently lost. The recovery will be furthered hampered by partial re-openings, physical distancing rules that reduce demand and raise operating costs, and probable changes in consumer preferences and behaviour.”
Under a best-case scenario, global GDP will decline by 6% in 2020 and then rise by 5.2% in 2021. If there is a second pandemic wave later this year, global GDP would likely decline by 8% in 2020, according to a recent OECD forecast. A second wave would also result in a much more modest upturn of 2.8% in 2021. Under either scenario the poor global backdrop will weigh heavily on B.C.’s economy.
“B.C.’s public health authorities have done an exemplary job of containing the pandemic in this province. B.C. accounts for only 2-3% of all COVID-19 cases and fatalities in Canada,” said Dr. David Williams, BCBC Vice President, Policy. “Nevertheless, the fallout from shutting down much of the economy will be substantial and will push the province into a deep economic hole. We are projecting a profound recession in B.C. The recovery will be bounded by ongoing public health restrictions and the overhang of private and public debt, making a consumer-led recovery difficult. Given these constraints, in the near term the province should be looking to its capital-intensive digital, industrial and agricultural sectors to operate safely and pull the rest of the economy to higher ground.”
Looking ahead, the Business Council is calling for all levels of government to do everything they can to support new company creation and help existing firms stay in business, and look to expand, in the post-crisis world.
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 250 leading and largest companies, post-secondary institutions and industry organizations from across B.C.'s diverse economy. The Council produces exceptional public policy research and advocacy in support of creating a competitive economy for the benefit of all British Columbians.
Director, External and Strategic Communications