B.C.’s ongoing recovery to persist through 2021 and beyond, but slow growth scenario expected

Vancouver, B.C., September 9, 2020 –

HIGHLIGHTS

• B.C.’s economy to contract by 6.1 per cent in 2020 with a recovery trend lifting growth to 4.0 per cent in 2021
• Moderate economic growth of 3.4 per cent forecast in 2022 and 2.2 per cent in 2023
• Economic output returns to pre-pandemic levels part-way through 2022 as services-sector recovery lags goods production
• Unemployment to average nearly 10 per cent by end of 2020, gradually improving to near 6 per cent by 2023
• Emergency government support programs for households and businesses to remain supportive through 2020, but benefits to moderate in 2021
• Major project investments announced pre-pandemic to provide support as businesses remain cautious
• Lumber sector lifted by spike in prices, but long-term supply constraints remain.

B.C.’s economic recovery is well underway particularly in employment, housing and retail spending but headline figures mask underlying challenges, according to Central 1 Deputy Chief Economist Bryan Yu, who expects 2020 to remain “a series of lowlights with contractions in nearly all areas of the economy.”

In his latest B.C Economic Analysis 2020-2023, Yu forecasts a GDP drop of 6.1 per cent this year, followed by a shallower recovery of about 4.0 per cent in 2021 with output returning to pre-pandemic levels in early 2022. The provincial economy is forecast to grow by 3.4 per cent in 2022 and by 2.2 per cent in 2023.

Yu stated: “Ongoing recovery is set to persist through 2021 and beyond – aided by major construction projects such as the LNG Canada project and the Site C Dam which were initiated prior to the pandemic – but will remain below pre-pandemic levels into 2022.”

B.C has recouped more than half of the 400,000 jobs lost from February through April but the unemployment rate is sitting near 11 per cent compared to 5 per cent in February. “The substantial rehiring spike due to re-openings of businesses closed by the pandemic were mainly part-time roles whereas full-time employment has been slower to rebound,” Yu commented, adding: “The unemployment rate is forecast to trend toward 8 per cent by the end of 2020 but will still result in an average unemployment rate close to 10 per cent due in part to the quicker rebound in labour force participation.”

Employment growth will decline by 7.1 per cent in 2020 and expand by 4.4 per cent in 2021 and by 2.3 per cent in 2022, moving employment back to pre-pandemic levels, according to the report. 2

“The housing cycle has been a huge surprise from what was anticipated at the early stages of the pandemic, and is likely propelled by a combination of pent-up demand in March and April, substantial cuts to mortgage rates and a shift in consumer preferences given the advent of work from home and constraints to leisure activities,” Yu said.

However, housing starts will decline by more than 20 per cent this year to 34,700 units and are only expected to rise modestly thereafter. The construction cycle will be tempered by fewer presales in prior years and a slowing of B.C.’s population growth to 1.0 per cent this year and to 0.6 per cent in 2021, reflecting global travel restrictions and reduced processing of permanent residency applications.

Retail spending returned to near February levels in July after a 25 per cent drop through April. However, Yu cautions: “Pent-up demand surely played a role in the uptick, particularly for vehicles, clothing and other discretionary items.” He added: “Retail spending is also only a part of total consumer spending, and lack of spending options on restaurants, entertainment and tourism is likely to be reallocated to goods therefore the gains from pent-up demand will likely retrace.”

On manufacturing and goods-exports, B.C fared well compared to other provinces due to lower exposure to the hardest hit sectors: automotive production and energy, but activity dropped by 11 per cent from 2019 due mostly to sawmill closures through that year. Yu notes a bright spot in lumber production, commenting: “Producers are turning back the clock as prices have unexpectedly surged on demand for renovations and a housing market that has remained surprisingly robust both in Canada and the U.S.”

Global growth is set to experience a modern record contraction (4.9 per cent) in 2020 and emergency fiscal supports aimed at bridging individuals and businesses through the pandemic are likely to come to an end at some point, leading to a drag on the recovery. “Adding to the slow growth scenario is the emergence of greater trade and political uncertainty between the U.S. and China,” said Yu.

According to the report, B.C. exports are forecast to rebound 4.5 per cent in 2021 and by 5.5 per cent in 2022, following an 11 per cent drop this year, “reflecting a combination of stronger global activity and rising tourism flows.”

Read the full B.C. Economic Analysis 2020-2023

About Central 1

Central 1 is a preferred partner for financial, digital banking and payment products and services – fuelling the success of businesses across Canada. We leverage our scale, strength and expertise to power progress for more than 250 credit unions and other financial institutions, enhancing the financial well-being of more than 5 million customers from coast to coast. For more information, visit www.central1.com.

– ENDS –

Contact

Meadhbh Monahan (pronounced ‘Maeve’)

Communications Specialist

Central 1

C 236-885-3363

E mmonahan@central1.com