Five things to know about BC’s economic future

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On Tuesday, Central 1 released its assessment of British Columbia’s economic fortunes over the next two years.

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It has been a very turbulent last few years, with COVID-19 and a catastrophic forecast, a provincial election, the resignation of a popular prime minister due to illness, and then inflation and fears of a housing crisis.

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Here are a few things to take from Central 1’s assessment of the near economic future:

things will slow down

British Columbia’s economy is forecast to slow this year in line with broader trends as the cumulative impacts of higher interest rates on consumer spending and business investment further deteriorate the global economic environment.

but not completely

Initial conditions of a tight labor market, high savings and support from major project construction activity will support growth for the year. GDP growth is forecast to rise to 1.4% in 2023 and 2.4% in 2025 as interest rates fall, while the completion of liquefied natural gas facilities will boost exports.

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Watch out for interest rates

“The higher interest rates seen over the past year continue to grind their way through the economy, and rolling over fixed-rate mortgages at higher interest rates will drag down consumer spending,” said Central 1 chief economist, Bryan Yu.

“BC households are more in debt than their peers in other provinces due to high home prices, which will eat away at other expenses.”

The good BC housing market is still there

The housing market suffered in 2022 due to higher rates, but has shown resilience this year as low listings and demand driven by a tight job market and strong demographic gains have propped up prices. The early-year bump will be constrained by poor affordability and will require prices to come down or interest rates to decline.

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“Housing starts lag behind resale market conditions and we expect activity to pull back this year despite a clear housing shortage. The trend picks up in 2024,” Yu said.

The unemployment rate could rise

Lower consumer spending and business investment are expected to limit hiring to 1 percent, picking up to 1.5 and 1.7 percent over the next two years. The unemployment rate is forecast to average around 5.5 percent due to robust population growth. At the same time, strong population growth will contribute to further growth in the economy.

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