British Columbia's finance minister got a decidedly downbeat forecast Friday from the government's hand-picked team of private-sector economists, but said the province is still well positioned to ride out global economic turmoil.
The Economic Forecast Council told Colin Hansen to expect lower than projected economic growth this year and next, with an Olympic-fuelled rebound in 2010.
The council estimated the B.C. gross domestic product will grow by 1.3 per cent this year -- down slightly from previous forecasts -- and 0.6 per cent next year, roughly half the previous estimate.
Gold revenue
But they predicted 2.7 per cent growth in 2010, thanks partly to an estimated $1 billion in revenues from the Olympic Winter Games.
Hansen was buoyed by the latest national employment statistics that showed the B.C. unemployment rate actually went down last month.
"It reinforces that while British Columbia's going to be facing some economic challenges (and) we're not immune to what's happening in the rest of the world, this is probably going to be a jurisdiction that's going to fare relatively better than most other jurisdictions in North America," he said.
"We are less dependent on the U.S. economy than any province in Canada. We have a greater percentage of our exports going to Asia, which even though we've seen some economic downturn they're still showing some pretty robust economic growth in most of the Asian countries, particularly China."
Forecast council member Helmut Pastrick of Central 1 Credit Union said the dollars that Olympic visitors will spend here won't be part of a bedrock economic revival.
"That's a nice boost to the economy but it is temporary," said Pastrick.
The forecast council's projections were down sharply from those they delivered to Hansen just last summer, the minister noted.
In his quarterly financial report last week, Hansen reduced his projected budget surplus this year to $450 million from $1 billion, not including a built-in $500-million forecast allowance.
Pastrick said that given next year's global economic outlook, the province may find itself using up that half-billion-dollar buffer.
"I think much of that will be needed," he said. "I don't think we'll see a deficit for the current fiscal year."
Hansen also promised to deliver a balanced budget in February, as required by a law the Liberal government passed when it took power in 2001.
"If the revenues are hit harder than expected, there'll have to be some give on the spending side to achieve the balance," Pastrick observed, but said drastic cuts would be necessary only if the U.S. situation worsens more than expected.
Hansen said the 12-member panel of wise men and women told him the global economy would start to revive in the second half of next year.
But the government is budgeting for 2009 based on the loss of $3 billion in anticipated revenue in the next three years, compared with previous forecasts, because of continued volatility in key sectors such as natural gas and minerals.
Hansen however promised increases in both health, education and social services.
The once dominant B.C. forest industry is likely to emerge much smaller from this downturn, Pastrick said. Dozens of mills have been closed in the last year and thousands of workers laid off with the collapse of the U.S. home-building market.
"I think a significant pickup in U.S. housing is probably not until 2011-2012, so much of this downsizing and consolidation in the forest products side in B.C. is likely permanent," he said.
Hansen said the province already has programs to help workers retrain or find temporary work and is aiding communities to diversify away from forestry.
He also defended the government's often-criticized policy of raw-log exports for processing in Asia as a way of maintaining jobs in the woods. NDP leader Carole James has said the wood should be processed here.
"If we stopped exporting logs to these countries in the short term, they're simply going to find their fibre supply somewhere else in the world," Hansen said.
With a report from The Canadian Press
