The economic recession is hitting British Columbia harder than many other provinces, but after falling faster the province should also rebound quicker, according to a provincial outlook from BMO Capital Markets Economics.
BMO is predicting that B.C.’s gross domestic product will contract 2.5 per cent in 2009, the same as the national average. But in 2010 the province should grow 2.0 per cent, ahead of the national average of 1.8 per cent.
“British Columbia has been among the hardest-hit provinces during this recession, as what started out as forestry-specific downturn eventually spread to the construction, energy and consumer sectors,” BMO economist Robert Kavcic wrote in the report.
The weakness in the forestry sector was originally caused by the housing slump in the United States combined with the strengthening Canadian dollar, Kavcic said in an interview.
“It was contained,” he said. “ But since then we’ve seen it spread to other areas like the domestic housing sector and consumer activity.”
Housing starts have dropped to levels last seen at the depths of the downturns in the early 1980s and ’90s.
Employment is down 2.5 per cent, with construction seeing the sharpest employment decline, off 17 per cent from its peak.
Retail sales are down 10 per cent in the first three months of the year compared to a year earlier.
“You’ve seen steeper job losses [and] one of the housing market’s sharpest contractions in the country, so that’s weighing on confidence,” Kavcic said. “And those factors are not good for consumer activity.”
As well, B.C. was one of the strongest-performing provinces before the recession, “so it’s a little extra give-back from that,” he said.
But B.C. will come back, fuelled by rising commodity prices and the government’s fiscal stimulus package, which will encourage non-residential construction, Kavcic said.
However, the residential construction sector will remain sluggish for some time because of overbuilding, he said.
The Olympics will “add a little boost, but not that big of a boost,” Kavcic said.
Across Canada, only Alberta (-2.7 per cent), Ontario (-3.1 per cent) and Newfoundland and Labrador (-3.5 per cent ) will fare worse than B.C. this year.
In 2010, those three provinces will also rebound strongly with both Alberta (2.2 per cent) and Newfoundland ( 2.4 per cent) expecting stronger growth.