CLR Connector B.C. Economic Review and Outlook
According to the latest report by the Business Council of British Columbia, a solid economic rebound is underway in B.C. Real GDP is set to increase by 5.8% in 2021 followed by a still strong 4.8% pace in 2022. The province’s resilient merchandise export sector and the construction of large capital projects tempered the downturn in 2020 and provided an early lift. The recovery is now broadening to most sectors.
B.C. is essentially on course to match Canada’s economic expansion this year. But because the downturn was less severe here, B.C.’s 2021 GDP will surpass its pre-pandemic (2019) level of output. In contrast, the Canadian economy (which shrank 5.8% compared to B.C.’s 3.8%) will not regain its pre-pandemic level of output until 2022.
B.C.’s broadly successful management of the pandemic and more limited closures helped limit the economic fallout from the virus last year. This is a principal reason why B.C. recorded the smallest real GDP contraction among the large provinces in 2020. Working to keep construction sites open and the export sector operating proved highly beneficial. Indeed, B.C.’s downturn was less severe in large part because big capital construction project sites remained open and our natural resource industries – which supply three-quarters of all merchandise exports – continued to operate even amid the worst of the pandemic.
Underscoring this point the value of economic activity (real GDP) in B.C.’s goods producing sector barely declined last year, while the other large provinces saw output in their goods sectors declined by 5% or more.
The natural resource, advanced technology, and professional/technical services sectors helped to lead the province out of recession in the second half of 2020 and are providing momentum in 2021.
The economic benefits of B.C.’s sizable inventory of large capital projects will continue to flow over the forecast horizon. The expansion of exports (goods plus services) will play a vital role in sustaining the province’s ongoing economic rebound, supported by strong global growth. But the main reason GDP growth will exceed 5% and may hit 6% in 2021 is the additional lift provided by the full reopening of consumer services. Domestic services will also gain from British Columbians’ desire to return to more normal activities, bolstered by an unusually high level of household savings.