Premier Gordon Campbell's Liberals were re-elected to a third-straight term last May largely on a promise to keep the province strong in tough times, instead the government revealed Thursday the B.C. economy was one of the weakest in the country.
Finance Minister Colin Hansen said the economy plunged into recession last year and was the second-worst performing provincial economy behind Ontario.
"As an exporting economy, one that is so dependent on international trade, we certainly were not immune to the effects of the global downturn, he said."
Hansen denied the government was trying to hide the state of the economy from British Columbians in an election year.
Instead he always said the province was better positioned for recovery heading into and out of a recession than most jurisdictions in North America.
Economists suggest the economic infusion that comes with hosting the Winter Olympics in 2010 in Vancouver and Whistler will help pull British Columbia out of the recession faster than most other jurisdictions, Hansen said.
Statistics Canada reported the B.C. economy contracted 0.3 per cent in the 2008 calendar year, second only to Ontario's shrinking economy of 0.4 per cent. Canada's economy grew by 0.5 per cent last year.
And, looking ahead, it gets worse for British Columbia's fiscal outlook, said Hansen, at a news conference where he released the government's public accounts detailing the final budget numbers for 2008/09.
"I'm more pessimistic, not less pessimistic, he said."
The government is no longer confident it can meet its budget deficit target of $495 million this year, and its projected return to surplus budgets within three years may now be off schedule, said Hansen, who will table a new budget Sept. 1.
The Opposition New Democrats and business analysts have been speculating for months the economic downturn will hit the government harder than it forecast and the deficit number should be much larger.
Some analysts have suggested the deficit could hit $2 billion.
Hansen said he was confident up until the middle of June the province could still meet its $495 million deficit target, but that changed on June 24 when Ottawa provided updated income and corporate tax numbers.
He said Ottawa reported that British Columbia can expect personal income tax revenues that are "significantly lower. But the biggest impact, and the one that sort of took my breath away, was what was happening on the corporate income tax revenues."
The public accounts documents revealed a sharp revenue decline of $1.5 billion, amounting to an $863 million drop in personal income tax, $212 million in corporate tax and $114 million in social services tax.
"I can no longer say that I'm that optimistic," Hansen said. There are still some big challenges. We still see lots of volatility. We will have no shortages in challenges in locking down (budget) numbers."
About the only bright spot was confirmation that British Columbia posted a $78 million surplus in 2008/09, he said. It had forecast a surplus of $50 million.
NDP finance critic Bruce Ralston said the Liberals promised to stick to their $495 million budget deficit target even though they likely knew during the election they would miss that number by a wide margin.
The provincial economy was the second weakest in Canada, but the Liberals still promised to keep the province strong during the election campaign, he said.
What we're now seeing is the minister of finance constructing an alibi for the premier, said Ralston. It's just not credible to say that on June 25 I got a phone call from Ottawa and I discovered that corporate revenue was declining in one of the most major recessions since the Great Depression.
