British Columbia’s economy is on course for a respectable showing this year, paving the way for provincial Finance Minister Mike de Jong to present a balanced 2014-15 budget despite uncertainty in real estate and natural resources.
B.C.’s real gross domestic product is expected to increase 2.3 per cent in 2014, according to the province’s economic forecast council.
“We had modest real GDP growth in the province for the past couple of years, but 2014 is going to be better,” said Cameron Muir, chief economist of the B.C. Real Estate Association and one of 13 members of the council, which gives economic advice to the minister in developing fiscal plans.
If the forecasts are right, this year’s economic performance will be a marked improvement over last’s year real GDP growth, estimated at 1.4 per cent.
Mr. de Jong will be striving for a stay-the-course plan when he tables the province’s new budget on Tuesday in Victoria, aiming for what might be the second consecutive year of balancing the books. With a relatively slim $165-million surplus projected for the current fiscal year ended March 31, there isn’t much room for major new spending initiatives.
Having the benefit of a stable real estate market helps consumer confidence; if companies and government make further progress toward exporting liquefied natural gas, that would bolster the B.C. economy.
But in both housing and commodities, short-term uncertainty is on in the horizon.
Mr. Muir said Ottawa’s shutdown of the federal immigrant investor program last week will likely have a muted economic impact, but there might be reduced sales volume for the most expensive detached homes on Vancouver’s west side, as well as in suburban Richmond and West Vancouver.
The B.C. government’s coffers get a boost when wealthy immigrants buy high-end homes because of the province’s property purchase tax (PTT), which was introduced in 1987.
On a $5-million house, for instance, a buyer would have
to pay PTT amounting to $98,000. The province expects to collect $790-million in total from the PTT in this 2013-14 fiscal year.
The size of the impact from the cancellation of the immigrant investor program will depend on what Ottawa introduces as a replacement, said Dan Scarrow, vice-president of corporate strategy at Macdonald Realty Ltd.
Details are still being worked out for a proposed immigrant investor venture capital fund Mr. Scarrow believes that while some rich immigrants from China might shy away from investing in British Columbia, “the ties between Vancouver and China are now firmly established.”
On the resources side, the global race to export LNG to Asia is heating up, but the B.C. government’s tax regime for the province’s nascent gas export industry won’t be laid out in detail until this fall.
There needs to be consultation with and approval by First Nations for B.C. LNG projects to forge ahead, said Roland Willson, chief of the West Moberly First Nations, which is part of the Treaty 8 Tribal Association. The association is playing host to a First Nations LNG conference this week in Fort St. John in northeastern British Columbia.
Mr. Willson will be looking for Tuesday’s budget to give more funding to skills training for thousands of workers who will be needed for natural-gas drilling projects and construction of pipelines that would go to new LNG export terminals in northwestern B.C.
“LNG has become a magical word to some people, but we need to understand it better and learn the impact that it will have on our land and the economy.
“If LNG development is happening, we want it to be done in a cohesive and sustainable manner,” he said.