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B.C. Economic and Fiscal Update 2020-21

While B.C.’s economy has been significantly impacted by the COVID-19 pandemic, public health measures taken in B.C. have limited the spread of the virus and enabled a safe, cautious restart of the economy.

B.C. began easing restrictions in mid-May and is now in Phase 3 of the restart plan. This reopening, along with the relief measures and supports introduced by governments and the Bank of Canada, will support the economy along its recovery path. Elements of uncertainty that will influence the depth and duration of the economic slowdown include:

  • future outbreaks in B.C. and among B.C.’s trading partners;
  • the evolution of public health policies and medical technologies, such as development of treatments and vaccines;
  • the responses of the general public and impacts on consumer spending and confidence;
  • the responses of businesses with respect to investment decisions, impacts on confidence, supply chain and business model adaptations;
  • the success of relief measures and supports, as well as the evolution of policies enacted by governments to support corporate cash flow and personal income, maximize job retention and curb infection rates; and
  • the success and evolution of policies enacted by central banks to provide liquidity in the financial system and laying the foundation for the recovery via low interest rates.

Economic highlights

  • In the snapshot presented, B.C.’s real gross domestic product (GDP) could decline by 6.8% in 2020, and as the recovery begins, the economy could grow by 3.1% in 2021.
  • Job losses in the province have been significant, with 235,100 fewer jobs in June compared to February. Job losses are not expected to be fully recovered this year. Employment in the province could decline by 9.8% in 2020. As businesses resume and people go back to work, employment could increase by 4.4% in 2021, representing an annual gain of 102,000 jobs.
  • Retail sales may decline by 15.9% in 2020. As employment and income prospects improve, consumer spending is expected to pick up, with possible retail sales growth of 8.6% in 2021.
  • Housing market activity has been mixed. Homebuilding activity continues to be resilient. However, there has been a steep decline in home sales. The value of residential sales may decline by 27.6% in 2020, followed by possible growth of 9.3% in 2021.

Operating results

  • Total changes since Budget 2020 in February amount to $12.751 billion.
    • Government’s support for people and businesses is estimated at $6.262 billion in 2020-21. This includes:
      • $5.0 billion in Supplementary Estimates spending;
      • $762 million in other business relief and tax measures; and
      • $500 million for the one-time increase to the climate action tax credit.
    • Overall revenue for 2020-21 is estimated to decrease by $6.313 billion under the scenario.
    • Additional debt servicing costs are estimated at $176 million.
  • Budget 2020 forecasted an operating surplus of $227 million, which based on the scenario would result in an estimated operating deficit of $12.5 billion for 2020-21.

Capital spending

  • Budget 2020 included $22.9 billion in taxpayer-supported capital spending over the fiscal plan and included new investments to sustain and expand provincial infrastructure, including schools, post-secondary facilities, housing, transit, roads, bridges and hospitals.
  • Capital projects are proceeding, and the construction industry is ready to deliver the Province’s historic capital plan.

Debt levels

  • Governments, like the private sector, borrow to finance the building of long-lasting capital infrastructure, such as schools, hospitals and highways. Recently, B.C. has had among the best debt metrics and credit ratings compared to other Canadian provinces.
  • Taxpayer-supported debt levels may reach $61.9 billion at the end of 2020-21. In Budget 2020, the projection was $49.2 billion.
  • The taxpayer-supported debt-to-GDP ratio may increase to 22% in 2020-21, up from the Budget 2020 forecast of 15.5%.
  • Despite the need for increased borrowing and higher debt levels, B.C. will benefit from low interest rates.

On average, private sector forecasters expect B.C.'s real GDP to decline by 5.4% in 2020, which is better than the decline of 6.6% on average across Canada, and ranks B.C. fourth among provinces.