B.C. Economic Forecast 2010 – 2013

B.C.’s economic growth will slow during 2011 in sync with the global economic slowdown, the winding down of fiscal stimulus, and a weaker comparison to the 2010 Winter Olympic boost. Prospects for 2012 and 2013 are more positive, with resurging private investment and consumer spending growth and the global economy on a stronger footing. Government spending on goods and services slows through to 2013, while infrastructure investment declines in 2012 and 2103. The trade deficit is forecast to widen steadily.

Domestic sectors will remain the growth drivers in the B.C. economy, though some of the forecast private investment resurgence is predicated on improving external markets for energy and mining products. Several major pipeline and mining projects are assumed to begin later in the forecast period.

Industries projected to post the highest growth rates are resource extraction and processing, construction, and those related to consumer spending. Forestry and wood manufacturing expands from deep recession lows, but remains well below pre-recession levels in 2013. Mining enjoys a revival due to new supply sources. Engineering and industrial construction of major projects and ongoing gains in residential activity will keep the construction sector growing.

The aftermath from the financial crisis is a lingering demand constraint on the economies of the U.S. and Europe, with repercussions for economies with close trade linkages such as Canada. B.C. has considerable trade exposure to the U.S. but its expanding export market with the faster-growing Asia-Pacific economies is a positive force.

Housing market

Residential construction is consistently one of the more important contributors to B.C.’s economic growth. Low mortgage rates propel housing sales higher in 2011, driving up housing starts in the process. Conditions point to annual housing starts rising through 2013, not only due to favourable financing costs, more employment, income, and population, but also to the release of pent-up demand accumulated in 2009 and 2010. Housing starts approach 34,000 units in 2013.

Highlights:

• B.C.’s economic growth slows to 2.4% in 2011 from 3.1% in 2010.
• Economy gains momentum in 2012 and 2013, expanding 3.3% and 3.6%, respectively.
• Resource sector rebounds from recession lows and benefits from new mining and energy project developments.
• Transportation and resource-related projects keep the construction industry busy, along with an upturn in housing and commercial investment.
• Consumer spending picks up on income and job gains.
• Unemployment stays above 7% in 2011, but drops below 6% by 2013.