The impact of COVID-19 on the B.C. government’s finances has been as devastating as expected, but there have been signs of a stronger recovery in employment, real estate and retail sales.
Finance Minister Carole James released the province’s first quarter financial report Thursday (Sept. 10), projecting a $12.8 billion deficit for the fiscal year that ends in March 2021. That’s similar to the economic scenario released in July, based on the actual results for April, May and June.
The forecast went as high as $13.5 billion after the B.C. government authorized an additional $1 billion in borrowing to match new federal funds to B.C. and other provinces for transit, municipalities and other supports in the pandemic. The latest forecast includes a $1 billion contingency fund to reflect that, as the B.C. and federal governments finalize how the latest relief fund is allocated.
“Since the province’s July fiscal and economic scenario, we have seen stronger than expected consumer spending, housing activity and employment gains,” James said.
StatCan figures to June on B.C. retail sales #COVID19BC pic.twitter.com/dr7dKzd49X
— Tom Fletcher (@tomfletcherbc) September 10, 2020
Since July, the province has seen better than expected employment gains, which slowed in the latest Statistics Canada report. B.C. Business Council chief economist Ken Peacock warned in his latest analysis that the job gains for August were less than June and July, indicating the “low-hanging fruit in terms of rehiring has been accomplished.”
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Much of B.C.’s unexpected revenue has come from property tax and property transfer tax revenues, real estate sales volumes recovering quickly and housing prices holding firm and rebounding by July.
Real estate sales are a major source of provincial income via the property transfer tax that hits every purchase #bcleg #COVID19BC pic.twitter.com/pHrqfhj1mF
— Tom Fletcher (@tomfletcherbc) September 10, 2020
James noted that B.C.’s economy depends on many factors outside its control, such as a potential second wave of COVID-19. That has prompted the province to boost health care spending by $1.6 billion for the current year, to add thousands of staff for senior care and double the capacity for COVID-19 testing and contact tracing.
RELATED: B.C. to expand COVID-19 testing, hospital capacity
Another big factor is the international economy, where B.C. is doing better than some other jurisdictions.
“In the April to June period, the Canadian economy saw the largest contraction on record,” James said. “Our neighbour to the east, Alberta, is forecasting a $24 billion deficit for this year. And the U.S. economy and the Eurozone saw their largest economic declines on record in this April to June period. Economic data suggest that the global economy could face its largest contraction ever.”
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