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B.C.’s economic recovery led by private sector growth and robust real estate market, while dependent on pandemic trajectory and global economic landscape

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Vancouver, B.C., October 21, 2021

Highlights:

  • B.C.’s economic recovery pace dependent on the evolution of the pandemic and a resolution of supply chain disruptions;
  • Private sector to lead province’s economic growth with technology and professional services to excel;
  • Real estate market to remain robust as demand continues, but home sales to decline by 15 per cent in 2022 after record-breaking 2021;
  • Export growth to slow as timber demand declines but TV and film production industry and a broader tourism recovery to aid performance into 2023.

British Columbia (B.C.) remains on track for a full economic recovery, but the path will be bumpy and the pace of growth dependent on the evolution of the pandemic and a resolution of supply chain disruptions, according to Central 1 Chief Economist, Bryan Yu in his latest Economic Analysis of British Columbia 2021-2023.

An economic growth rate of 5.3 per cent is predicted in B.C. this year, followed by the province’s growth decelerating to 4.2 per cent in 2022 and 2.6 per cent in 2023 as economies return to a longer-term output trend. This growth modestly exceeds Canadian GDP growth of 5.0 per cent this year, and 4.1 per cent and 3.0 per cent in 2022 and 2023.

As the Canada-wide economy seeks to navigate the uncertainty posed by potential risks such as new COVID-19 variants and persistent inflation which could trigger more rapid interest rate hikes, Yu notes that “high energy prices are beneficial to Canada for nominal GDP and act as buffer against import inflation.” In addition, he states: “Interest rates are expected to remain accommodative despite a recent increase in five and 10-year yields catalyzed by high inflation and expectations of earlier hikes to the U.S. policy rate. The Bank of Canada’s overnight rate is forecast to remain at current levels until a 25-basis point hike well into the second half of 2022, and to climb 75 basis points in 2023.”

B.C. will continue to outpace the national performance through 2022, with the private sector leading growth. “Technology and professional services sectors will outperform, as will retail trade as population growth aids performance,” states Yu, adding: “Accommodations/food services and arts/entertainment/recreation will growth at a rapid pace, but those industries will still remain below pre-pandemic levels through 2023, reflecting tourism challenges, public health fears, and less business travel. Manufacturing and public administration are forecast to grow at a slower pace.” Yu points out that B.C.’s economy will be buoyed by robust government spending on capital projects such as ongoing Millennium Line UBC Extension.

B.C.’s labour market is tightening, and the province has fully recouped headline pandemic employment losses, with levels up 1.5 per cent compared to February 2020, marking the strongest recovery among provinces. However, full-time employment is yet to recover and labour market slack remains elevated in the hospitality and foodservices and international tourism sectors. Employment is forecast to grow by 6.5 per cent this year, and by 3.2 per cent in 2022, before slowing to 2.0 per cent in 2023. The average unemployment rate will decline from 6.6 per cent this year to approximately 5.5 per cent by 2023.

Export growth is anticipated to slow as global demand for goods such as timber normalizes following strong demand in 2021, but B.C. will continue to benefit from growth in the export of services, for example, the ongoing robust TV and film production industry and a broader tourism recovery which will occur as travel restrictions ease further.

B.C.’s home sales are expected to decline by 15 per cent after a record performance in 2021, but the robust market will continue to drive economic growth. “Buyers remain active despite steep erosion in affordability, and residential investment growth is forecast to hit 14 per cent this year,” said Yu, adding: “The events of the past year amplified the importance of housing in the lives of B.C.’s residents, not only as a place to live, but one to work and entertain, thereby driving up home ownership demand across the province. A surge in interprovincial migration has further contributed to demand.”

About Central 1

Central 1 cooperatively empowers credit unions and other financial institutions to deliver banking choice to Canadians. With assets of $13.2 billion as of June 30, 2021, Central 1 provides critical services at scale to enable a thriving credit union system. We do this by collaborating with our clients, developing strategies, products and services to support the financial well-being of their more than 5 million diverse customers in communities across Canada. For more information, visit www.central1.com.

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