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British Columbia Recovery Among Strongest in Canada – BMO

VANCOUVER, British Columbia, June 22, 2010 — After a hard hit from the recession, British Columbia is now firmly in recovery mode, according to the Provincial Outlook report issued today by BMO Capital Markets Economics. After contracting 2.3 per cent in 2009, real GDP is expected to reach a solid 3.9 per cent this year, placing it among the strongest in Canada.

“While the temporary boost from the 2010 Olympic Games has faded, strong domestic demand is driving a sustainable recovery,” said Robert Kavcic, Economist, BMO Capital Markets. “Higher commodity prices will also keep investment activity in the mining, oil & gas sectors humming. Exports should also firm as global demand recovers. While a strong Canadian dollar will limit growth, the forestry sector will benefit from a recovery in U.S. housing starts, and sales to Asia - now more than a quarter of international goods exports - will benefit from strong growth in that region.”

The province’s housing market has seen a furious rebound, with average prices rising 30 per cent from the recession low, to a record level. However, this bounce reflects a significant amount of pulled-forward demand, as buyers moved to beat stricter mortgage rules, well-telegraphed Bank of Canada interest rate hikes and the introduction of the July 1st HST. As a result, softer demand and more supply have already begun to hint at a cooler housing market in the second half of the year. Still, the spill over effect to construction activity has been significant, with housing starts more than doubling from their recession low.

The Province of British Columbia is forecasting a $1.7 billion deficit for fiscal 2010/11, a $1.1 billion improvement over the $2.8 billion shortfall estimated for fiscal 2009/10. The commitment to eliminate the deficit by fiscal 2013/14 remains in place, and with contingencies of $450 million embedded in each year and forecast allowances that move up from $300 million to $400 million, the deficit could easily be eliminated a year or two earlier if these amounts are not needed and deployed to the bottom line. The return to balance hinges on a sturdy rebound in revenue - 4.6 per cent annually in the four years through fiscal 2013/14 - combined with a moderate slowdown in spending growth to 2.3 per cent annually. On a real per-capita basis, total spending will contract 1.2 per cent annually over the next four years, similar to the restraint seen in the mid-1990s and mid-2000s.

News source: BMO Financial Group

 

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