B.C.’S First Quarterly Report shows the province’s economy is proving resilient amid challenges, including a devastating wildfire season, high interest rates and costs, and a slowing global economy.
“With a diverse economy and strong financial planning, B.C. is in a good position to weather global uncertainties as well as keep people safe through this wildfire season and drought,” said Katrine Conroy, Minister of Finance, on Wednesday.
“Through challenges like the pandemic, global inflation and high interest rates, we have led the country in making smart investments in people and the services and infrastructure they depend on.”
The updated year-end deficit is projected to be $6.7 billion, which is an increase of $2.5 billion from Budget 2023. The Province says the change is mainly due to spending to protect people and communities from wildfires as B.C. faces the worst wildfire season in B.C.’s history, and volatile global natural gas prices, leading to a drop in natural gas revenues.
B.C.’s faster-than-expected economic recovery from the COVID-19 pandemic helped lay the foundation to weather the challenges ahead. The first-quarter fiscal update shows lower taxpayer-supported debt this year, as a decrease in total provincial debt in 2022-23 put B.C. in a strong position to navigate a cooling economy.
“Supporting people and communities has made our economy stronger and better able to withstand challenges, and we will continue to have people’s back now and for the long term,” Conroy said.
The province will continue to be affected by global uncertainties, yet B.C.’s economy is proving resilient. B.C. is seeing better-than-expected performance this year in housing starts and the labour market, which have helped lead the province to an improved economic forecast of 1.2% growth in 2023.
“During hard times and slower economic growth, the old government chose to cut services and increase fees, which was the wrong approach,” Conroy said. “No matter what, we’re putting people first and making decisions that support the services and infrastructure they depend on to build a good life.”
New home construction was up 15.5% year-to-date to August and is expected to continue to trend at an above-average pace. Employment in the province increased by 1.3% year-to-date to August, while B.C. continues to see a lower unemployment rate than the national average.
British Columbia has among the best credit ratings of all provinces and one of the lowest debt-to-GDP ratios in the country, which translates into low debt servicing costs for B.C.
Projected capital spending increased by $413 million, mostly to support improvements to health-care facilities and housing projects. The update also includes several projects approved for construction since Budget 2023, including Phase 2 of the Burnaby Hospital redevelopment.
The longer-term outlook in the financial plan forecasts that global economic headwinds will affect B.C. and the rest of Canada in 2024, with slower economic growth and higher unemployment. Levels of prudence are built into the fiscal plan, including $5.5 billion in contingencies and a $700-million forecast allowance this year to respond to unanticipated changes or expenses.
Learn More:
To access the First Quarterly Report, visit:Â https://www2.gov.bc.ca/gov/
BACKGROUNDER
First Quarterly Report 2023-24
Economic highlights
* B.C.’s economy is performing better than expected this year. Real GDP is forecast to grow 1.2% in 2023, and the forecast for nominal GDP also rose slightly to 2.9% compared to Budget 2023.
* Forecasts for 2024 show slower economic growth of 0.8% (real GDP) stemming from interest rates remaining elevated longer than previously forecast, before increasing to 2.4% in 2025.
* New home construction in B.C. remains the best in the country, with a 15.5% increase in housing starts in January through August compared to the same period in 2022.
* Population growth is supporting B.C.’s labour market. The updated forecast for 2023 employment is now 1.1%, up from Budget 2023, while the unemployment rate is lower than anticipated at budget, at 5.4%.
Operating results
* Revenue for 2023-24 is forecast to be $1.5 billion lower than projected in Budget 2023 – primarily due to the drop in natural gas prices and lower 2022 personal income tax revenue.
* The global price of natural gas fell by more than 50% since Budget 2023, resulting in $1.18 billion less in royalties in 2023-24.
* There are multiple layers of prudence in the fiscal plan, including contingencies, forecast allowance, a prudent economic outlook for B.C.’s major trading partners, and natural gas royalty prudence. The Province forecasts natural gas revenues based on the lowest 20th percentile of private-sector price forecasts, which helps shield the fiscal plan from impacts of fluctuation.
* Expenses are forecast to be $996 million higher, largely due to the provincial wildfire response.
Capital spending
Taxpayer-supported capital spending on health facilities, housing, schools, transportation infrastructure and other projects is forecast to total $12.2 billion in 2023-24, $367 million higher than forecast at budget.
New taxpayer-supported capital projects approved for construction since Budget 2023 include:
K-12 schools
* Carson Elementary school ($61 million)
* Cloverley Elementary school ($64 million)
* East Side Elementary school ($59 million)
* Guildford Park Secondary school ($65 million)
* La Vallée (Pemberton) Elementary school ($66 million)
* North East Latimer Elementary school ($52 million)
* Prince Rupert Middle school ($127 million)
* Tamanawis Secondary school ($57 million)
Post-secondary schools
* Capilano University – New Squamish Campus ($63 million)
* Vancouver Community College – Centre for Clean Energy and Automotive Innovation ($291 million)
Hospitals and long-term care facilities
* Abbotsford Long-Term Care ($211 million)
* Campbell River Long-Term Care ($134 million)
* Delta Long-Term Care ($180 million)
* FW Green Long-Term Care ($156 million)
* Richmond Long-term Care ($178 million)
* Burnaby Hospital Redevelopment Phase 2 and BC Cancer Centre ($1,731 million)
Social housing
* 1015 Hastings St. Development ($151 million)
* 128 to 134 East Cordova St. ($166 million)
* 320 Hastings St. E. Redevelopment ($86 million)
Transportation infrastructure
* Highway 1 Corridor – Falls Creek ($143 million)
* Highway 1 Goldstream Safety Improvements ($162 million)
* Highway 1 Jumping Creek to MacDonald ($245 million)
* Highway 1 Selkirk ($129 million)
* Belleville Terminal Replacement ($304 million)
* Blackwater North Fraser Slide ($203 million)
* Cottonwood Hill at Highway 97 Slide ($335 million)
* Self-supported capital spending is $46 million higher than at Budget 2023, mostly due to timing changes for BC Hydro projects.
Debt levels
* B.C.’s forecasted total debt level in 2023-24 decreased $4.9 billion from Budget 2023, primarily due to lower debt in 2022-23, which was supported by a $704 million surplus.
* Debt-affordability metrics for the Province remain among the best in Canada, including the forecast for debt-to-GDP at 17.6%.
