British Columbia is forecast to post its seventh consecutive balanced budget as steady gains in population and employment help bolster the economy.
The provincial NDP government tabled its second full-fledged budget on Tuesday, predicting that British Columbia’s gross domestic product will grow this year by 2.4 per cent to top all provinces.
“I’m proud to say that British Columbia’s economy is thriving,” B.C. Finance Minister Carole James said in her budget speech in Victoria.
Ms. James pointed to strength in areas such as tourism, technology, agriculture and manufacturing.
“Businesses have the assurance of a thriving economy, a balanced budget and some of the lowest personal income taxes in this country,” she said.
British Columbia’s population surpassed five million in the third quarter of 2018, and is expected to grow 1.3 per cent this year. The number of people in the province’s labour force is predicted to expand by 1.3 per cent in 2019.
The forecast for the 2019-20 fiscal year features a $274-million surplus, despite a cloudy outlook for tax revenue from the resource sector. Lumber and coal prices are expected to slump.
The previous BC Liberal government touted planned exports of liquefied natural gas as a nascent industry that would transform the province, but the BC NDP government under Premier John Horgan has tempered expectations.
Instead of promoting an entire LNG industry in the province, the NDP has thrown its support behind one major project, the Royal Dutch Shell PLC-led LNG Canada terminal planned for Kitimat.
The economic forecast council, comprising representatives from 13 institutions such as chartered banks, envisages B.C.’s GDP expanding by 2.5 per cent in 2019, compared with 2.3 per cent last year.
“All 13 forecasters have incorporated the LNG Canada project into their assumptions,” the council said in budget documents.
The Finance Ministry, which consults with the council in its budget preparations, said it opted to be cautious and forecast GDP growth of 2.4 per cent this year.
Jock Finlayson, chief policy officer at the Business Council of British Columbia, said the BC NDP government is working with a slender surplus that could be easily thrown off if the economy weakens. “It’s a pretty skinny surplus on an almost $60-billion budget,” he said an interview.
LNG Canada has started work on constructing its $18-billion Kitimat export terminal and TransCanada Corp. is doing preliminary work on its $6.2-billion Coastal GasLink natural gas pipeline route from northeast B.C. to the West Coast.
The Unist’ot’en protest camp, supported by five prominent Wet’suwet’en Nation hereditary chiefs, opposes Coastal GasLink.
“If the LNG project is derailed at this point, it would be disastrous for the investment reputation of British Columbia,” Mr. Finlayson said.
Bryan Yu, deputy chief economist at Central 1 Credit Union, cautioned that the NDP has taken an optimistic view for a swift recovery in the housing market and may be overshooting on projections such as revenue from property transfer taxes (PTT) for 2019-20.
“There isn’t a lot of wiggle room,” Mr. Yu said. “There is a downside risk on the housing side for sales and prices.”
During the 2017-18 fiscal year, while the housing market was still buoyant, the B.C. government collected $2.14-billion in PTT, and that is expected to fall to $1.91-billion in each of the current and next fiscal years with the slowdown in housing, especially in the Vancouver region.
Paul Kershaw, founder of Generation Squeeze, a lobby group formed to represent the views of Canadians in their 40s and younger, believes the forecast reduction in PTT is a small price to pay. The decline reflects a much-needed drop in housing sales and prices during the affordability crisis, Mr. Kershaw said.
Demographer Andy Yan noted that the province’s surtax on properties assessed for more than $3-million won’t be garnering as much revenue as originally expected because of the decrease in values. Mr. Yan estimates that the number of properties assessed at more than $3-million in the City of Vancouver fell by nearly 20 per cent from mid-2017 to mid-2018.
The BC NDP minority government unveiled its inaugural budget update in September, 2017, and tabled two full-fledged budgets since then, including latest one on Tuesday.