Fiscal update shows continued impact of pandemic on B.C.’s economy (flickr.com)

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B.C.’s Fall 2020 Economic and Fiscal Update

The Fall 2020 Economic and Fiscal Update is the Province’s third report highlighting the economic impacts of COVID-19 in B.C. The improved economic outlook from September’s First Quarterly Report includes improvements in employment, retail sales and housing activity.

The Province is forecast to end the fiscal year with a deficit of $13.6 billion, $851 million higher than September’s projection mainly because of continued COVID-19 response measures for people and businesses.

Economic highlights:

  • B.C.’s real gross domestic product (GDP) is forecast to decline by 6.2% in 2020, before increasing by 3.0% in 2021.
  • After experiencing substantial job losses in March and April, the B.C. labour market has been improving.
  • B.C.’s total employment is up to 98.5% of pre-pandemic levels. This is the highest job recovery rate of any of Canada’s four largest provinces.
  • B.C.’s unemployment rate for November was 7.1%, up from 5.0% in February.
  • Retail sales had their largest monthly decline on record in April. However, retail sales rebounded as restrictions began to ease in May and have now surpassed pre-pandemic levels.
  • Retail sales were 0.6% lower in the January to September period of this year, compared to the same period of last year.
  • Housing market activity has been resilient despite the pandemic, and B.C. home sales increased by 18.2% in the January to November 2020 period, compared to the same period last year.
  • An average of six private-sector forecasters expect B.C. real GDP to decline by 5.2% in 2020 and grow by 4.5% in 2021 – better than the expected decline of 5.7% on average across Canada for 2020 and similar to the 4.5% growth expected nationally for 2021.

Operating results:

  • To date, the Province has invested over $10 billion in relief and recovery measures to support British Columbians, businesses and communities through the pandemic. This includes an estimated:
    • $5 billion in supplementary estimates as part of the initial B.C. COVID-19 Action Plan in March;
    • $810 million in provincial contributions toward federal and provincial cost-shared restart initiatives for transit and municipalities;
    • $2 billion for priority pandemic response initiatives such as the B.C. Recovery Benefit;
    • $760 million in COVID-19 related statutory spending; and
    • more than $1.5 billion in other tax and revenue measures.
  • Compared to B.C.’s First Quarterly Report, revenue is forecast to be $1.4 billion higher and expenses are projected to be $2.3 billion higher.
  • Revenue for 2020 is forecast to be $57 billion and expenses are forecast to be $70 billion, with a forecast allowance of $1 billion.
  • Budget 2020 forecasted an operating surplus of $227 million and the Fall 2020 Update projects an operating deficit of $13.6 billion, including a $700 million increase to the forecast allowance.

Capital spending:

  • Total capital spending is projected to be $10.1 billion and includes new investments to sustain and expand provincial infrastructure including schools, post-secondary facilities, housing, transit, roads, bridges and hospitals.
  • The projected spending is $389 million lower than forecasted in Budget 2020, due to project timing changes.
  • Capital projects are proceeding, and the construction industry continues 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. In recent years, B.C. has had among the best debt metrics and credit rating compared to other Canadian provinces.
  • Taxpayer-supported debt levels are projected to reach $60.5 billion by the end of the fiscal year - $744 million higher than forecasted in the First Quarterly Report.
  • The projected taxpayer-supported debt-to-GDP ratio is unchanged since the First Quarterly Report at 20.8% in 2020-21, up from the Budget 2020 forecast of 15.5%.
  • Despite a significant increase in borrowing in 2020 and higher debt levels, B.C. will benefit from low interest rates partially due to the Province’s triple-A credit rating.
  • As a result, the Province’s debt remains affordable.