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First Quarterly Report 2022-23

Economic highlights

  • B.C.’s economy is expected to continue its recovery this year and grow modestly next year. Real GDP is forecast to grow by 3.2% in 2022 and 1.5% in 2023. Nominal GDP is forecast to grow by 11.6% in 2022 and 3.5% in 2023.
  • Year-to-date to August 2022, employment was up 3.6%. The unemployment rate remains low at 4.8% in August 2022.
  • Growth in consumer spending on goods is moderating, reflecting the impacts of global inflation and rising interest rates. Retail sales in the first six months of 2022 are up by 1.5% year-to-date.
  • Housing construction activity remains elevated, well above the 10-year historical average, however, home sales activity has fallen below average historical levels in recent months as markets adjust to rising interest rates.
  • Strong commodity prices, such as natural gas and coal have benefitted the value of B.C. goods exports. Year-to-date to June 2022, B.C. goods exports were up 32.1% and service exports are continuing to recover as tourism resumes.

Updated operating forecasts

  • Improvements were seen in all three years of the fiscal plan, with a surplus of $706 million forecast for 2022-23, and deficits of $3.8 billion and $2 billion over the next two years. (Improved from deficits of $5.5 billion, $4.2 billion and $3.2 billion, respectively, in Budget 2022).
  • Both revenue and expense forecasts are higher than Budget 2022.
  • Expense forecasts are higher than budgeted to account for cost-of-living measures, wildfire response and updated estimates for new labour agreements.
  • $1 billion is budgeted for new cost-of-living measures, including the Climate Action Tax Credit and the BC Family Benefit (formerly the Child Opportunity Benefit) measures.
  • The improvement in revenue forecasts is across all revenue streams: taxation, natural resources, federal transfers and commercial Crown corporations.
    • Income tax revenue improvements are in part from higher-than-expected 2021 income tax returns, higher household income growth, and updated federal government information.
    • Natural gas royalties are up $1.7 billion this year, and other natural resource revenues are also higher, mainly reflecting increased commodities prices.
    • Other key improvements are in sales tax revenues, Employer Health Tax due to improved wages and salaries, and federal government transfers, mainly for disaster financial assistance.
  • Contingencies remain the same as at budget, which includes $400 million for flood recovery, and $2 billion for pandemic response.
  • The forecast also includes $2 billion annually for 2023-24 and 2024-25 for caseload pressures and priority initiatives to be developed for future budgets.

Capital spending

  • Taxpayer-supported capital spending is forecast to total $29 billion over the fiscal plan period, $1.6 billion higher than in Budget 2022. Most of the increase is due to changes in the timing of expenditures within projects. It also includes the addition of capital projects, such as the business plan approval for the Surrey-Langley Skytrain.
  • Commercial Crown capital spending remains unchanged at $12 billion over three years.

Debt levels

  • Debt level forecasts are lower than Budget 2022, which results in improved debt-affordability metrics – for example the Debt-to-GDP ratio at the end of the fiscal plan is now expected at 20.3%, compared to 22.8% in Budget 2022.