A weakening B.C. economy will weigh heavily on whichever party forms the government after Tuesday’s provincial election.
British Columbia’s outlook is dogged by slower economic growth in China, slumping commodity prices and questions surrounding how durable the recovery in U.S housing starts will be.
And there’s the slump in the local real estate market, which has seen both prices and sales activity fall.
“Whoever is going to win power in the election is going to come into office presiding over an economy that is growing at a very sluggish pace, with a lot of uncertainties and risks out there,” Jock Finlayson, executive vice-president of the Business Council of British Columbia, said in an interview Monday.
In the short term, there is little influence that any newly elected government will be able to exert on the provincial economy, said Hamish Telford, head of the political science department at the University of the Fraser Valley.
While the NDP and Liberals have sought to highlight their differences on tax policies during the election campaign, “they appear to be different only at the margins,” Mr. Telford said.
For instance, the NDP is proposing relatively small shifts such as raising corporate income tax rates slightly higher than the Liberals, he noted.
Over the longer term, greater policy differences emerge.
The NDP in particular has raised concerns about fracking in natural gas production, and the party has vowed to reverse a decision by the B.C. Liberals to streamline provincial environmental reviews with the Canadian Environmental Assessment Agency. The Liberals charge that the NDP would harm the economy, but New Democrats counter that they support job creation in a sustainable fashion.
The B.C. Liberals have been in power since 2001, while the province’s New Democratic Party is seeking to win its first B.C. general election since 1996.
The business council forecasts that the province’s economy will grow by 1.6 per cent this year, down slightly from an estimated 1.7 per cent last year. British Columbia’s growth in real gross domestic product has slowed, compared with 2.6 per cent in 2011.
“We’re not changing our 2013 forecast based on who wins the election. We will revisit the forecast later in the year once we see a new budget,” Mr. Finlayson said.
For British Columbia, which is banking on increased exports to China to help bolster the province, strong lumber prices have been a pleasant surprise. The rebound in U.S. housing starts has provided a welcome lift to long-suffering B.C. lumber producers. Many of those producers have diversified beyond the United States over the years by selling wood products to Asian customers.
Natural gas markets are showing early signs of staging a recovery. But a range of other commodities have slumped over the past 18 months, notably prices for coal, copper and zinc – hurt by fears of China’s economy taking a breather, PricewaterhouseCoopers said in a report on B.C.’s mining industry.
The Liberals and NDP have touted the potential in exporting liquefied natural gas. Still, it will take years for the fledgling LNG industry to become a reality, and even then, it is unclear how many projects will go from the drawing board to the production and pipeline phase.
Two oil pipeline proposals, Northern Gateway and the planned expansion of the Trans Mountain system, are touted by the energy industry as crucial to helping boost Canadian exports. Those proposals, however, face high hurdles. The NDP, for instance, opposes Kinder Morgan Canada Inc.’s Trans Mountain plans to increase oil tanker traffic at the Port of Vancouver. Both the Liberals and NDP have expressed major concerns about Northern Gateway.
In December, Moody’s Investors Service cautioned that $39.8-billion of B.C. debt securities were at risk of a ratings downgrade because of a tepid economy. Moody’s reduced its outlook on the province’s debt to “negative” from “stable” at the time. In April, the credit-rating agency decided to maintain the province’s triple-A rating, but warned that its outlook on British Columbia’s debt is still “negative,” reflecting the risks in the province’s ability to produce balanced budgets and attack debts.
British Columbia’s Liberal government estimated that the province had a $1.2-billion deficit for the 2012-13 fiscal year. In February, the Liberals forecast a balanced budget for 2013-14, but the NDP argued that the prediction of a slim $197-million surplus got a big assist from property asset sales totalling more than $800-million.
“If the province is unable to stabilize and then reverse the accumulation in debt, then downward rating pressure could emerge,” Moody’s said last month.