Downturn predicted but big infrastructure projects should save the day
On Tuesday, Central 1 released its assessment of British Columbia’s economic fortunes over the new two years.
It’s been a very turbulent past few years, with COVID-19 and a forecast of doom, a provincial election, a popular premier stepping down because of sickness and then inflation and fears of a housing bust.
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Here are some things to take from Central 1’s assessment on the near economic future:
Things are going to slow down
British Columbia’s economy is forecast to slow this year in line with broader trends as the cumulative impacts of higher interest rates on consumer spending and business investment, and deterioration in the global economic environment.
But not completely
Initial conditions of a tight labour market, elevated savings, and support from major project construction activity will support growth for the year. GDP growth is forecast to increase 1.4 per cent in 2023 and 2.4 per cent in 2025 as interest rates fall while completion of liquefied natural gas facilities will lift exports.
Keep an eye on interest rates
“Higher interest rates observed over the past year continue to work their way through the economy, and renewal of fixed rate mortgages at higher interest rates will drag on consumer spending,” said Central 1 chief economist Bryan Yu.
“B.C. households are more indebted than peers in other provinces given high home prices, which will take away from other spending.”
Good old B.C. housing market hangs in there
The housing market suffered in 2022 due to higher rates, but has shown resilience this year as low listings and demand driven by a tight labour market and strong population gains have propped up prices. The early year bump will be constrained by weak affordability and will need prices to fall or interest rates to decline.
“Housing starts lag resale market conditions and we expect activity to fall back this year despite a clear housing shortage. The trend rebounds in 2024,” Yu said.
Unemployment rate could rise
Slower consumer spending and business investment is expected to restrain hiring to one per cent, with a rebound to 1.5 and 1.7 per cent over the next two years. The unemployment rate is forecast to average around 5.5 per cent on robust population gains. At the same time strong population growth will contribute to broader growth in the economy.
dcarrigg@postmedia.com
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