British Columbia's economy continues to grow faster than expected this year, the province's largest business organization says, with strong job growth, substantial increases in consumer spending, rising exports and booming tourism.
It is the second time the Business Council of B.C. has revised upward its economic forecast for 2017 – it now projects 3.1 per cent growth for the year. That continued buoyancy was also recognized on Thursday by the bond rating agency Standard & Poors, which confirmed the provincial government's coveted triple-A credit rating.
"The ratings reflect the province's strong and increasing economy, robust liquidity, and sound financial management practices," the S&P rating outlook says. It has also given B.C. a "stable" outlook, on the expectation that the new NDP government will maintain the financial prudence delivered in its first mini-budget in September.
Economist Jock Finlayson, co-author of the business council's report, said in an interview the province is enjoying "a nice tailwind" from low interest rates and a weak Canadian dollar.
The rosy fiscal and economic news was welcomed by Finance Minister Carole James. "Confirmation of our 'AAA' credit rating shows that British Columbia's economic performance is strong and that we are on a fiscally sustainable path forward," Ms. James said in a statement. "We will continue to take concrete steps to ensure the fiscal well-being of British Columbia both today and into the future."
The NDP formed the government in July, and introduced an updated budget in September that included income-tax hikes on the wealthiest British Columbians and a rise in corporate taxes. It also increased spending by $1.7-billion without going into deficit, to boost spending on education, health care and affordable housing.
Three major bond rating agencies have now assessed that budget and confirmed the NDP government is demonstrating sufficient fiscal discipline to maintain its top-notch credit rating.
However, Mr. Finlayson said it will be more revealing to measure the government's fiscal record after Ms. James delivers her first full budget next February. And, he said, the positive economic news may be a coincidence rather than a reflection of this government.
"It's way too early to start attributing either the positive or negative trends we see in the B.C. economy to the work of government," he said, adding: "Most of what happens in the economy isn't driven by government anyway."
In the economic update, the council noted that this will be the fourth consecutive year that the province has enjoyed economic growth of more than 3 per cent.
"Robust consumer spending has made a big contribution to B.C.'s impressive economic growth performance. Job growth, rising incomes, still-low interest rates, a booming tourism sector, and high levels of spending on housing-related goods and services have all contributed to strong gains in retail sales and in overall consumer outlays," the report says.
Modest increases to interest rates and tighter mortgage lending requirements for banks will dampen housing activity next year, the business council predicts. "We do not anticipate a major market correction, however, notwithstanding eye-watering housing prices in urban areas of the province."
The report warns the biggest risk in the short term for the provincial economy is the outcome of the renegotiation of the North American free-trade agreement.
"Failure to secure a favourable trade deal with the U.S. that maintains Canada's access to the vital American market would have negative implications across the Canadian industrial economy, leading to job losses and diminished business investment."
The most significant influence the provincial government will have on the economy, Mr. Finlayson said, is the decision that will be taken in the next few weeks on the construction of the Site C dam.
Mr. Finlayson said it's an important signal to the investment community about the ability to build major projects in B.C. – especially since the NDP government is fighting the Kinder Morgan pipeline expansion, and has cancelled the George Massey Tunnel replacement.
"If you hadn't started this project already, it is likely that the smartest course of action would be to delay – but that's not the world we are living in," he said.