Home  Blog BC Growth Looks Bright
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Written by Administrator
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Sunday, 10 December 2006 |
BC's growth continues to look bright
'You're the Gloomy Gus," I said to Ernie Stokes of Stokes Economic Consulting as he emerged from a meeting room Friday where he and 12 other economic advisers had been briefing Finance Minister Carole Taylor on B.C.'s economic outlook.
"No," he said, looking taken aback. "I'm an optimist."
Both of us were right.
Stokes predicts growth for the province this year of 3.5 per cent -- half a percentage point lower than the average of his peers, and a whopping 1.4 per cent less than the highly optimistic Craig Wright of RBC Financial Group. So I wasn't wrong to note that his was a lowball figure.
But 3.5 per cent this year -- and 2.8 per cent for each of the next two years -- are respectable growth numbers in any developed economy.
Last year, for example, the preliminary data showed B.C.'s growth rate to be 3.5 per cent (it was later revised upward to 3.7), and a BC Stats report called this "stellar". This wasn't hyperbole -- we beat every province but Alberta. And only once in the 1990s did we ever see performance that good.
So when even Gloomy Gus is talking stellar numbers, you can take it that the B.C. economy is looking good.
Finance Minister Taylor will no doubt take note of that -- she'll probably take as a working estimate a figure slightly lower than the advisers' average when she sits down with her bean counters to work on her February budget.
But neither she nor you can take these numbers to the bank.
For one thing, there will be a huge difference in economic impact depending on which forecaster -- Stokes at the low end, Wright at the high end, or someone in the middle -- proves to be right. That will impact government coffers directly, and ultimately taxpayers' wallets.
Despite different numbers, the forecasters are all looking at the same things, just from slightly different perspectives. All see powerful domestic demand with all the building going on and all the jobs, and that drives the numbers up. And all see some negatives -- both real and potential.
The negatives include our major trading partner's economic doldrums, especially the weak housing market in the U.S. Add wildly fluctuating commodity prices that can just as easily be down as up. Factor in our strong dollar, which tends to keep foreign tourists at home and foreign buyers from snapping up our exports. And there's not only a shortage of skilled workers, but also fierce competition with Alberta for those who might be enticed to come here.
A little further down the road, the big impact of the pine beetle will be felt. There may be a slowdown driven by soaring construction costs. And there's certain to be a huge demographic shift as baby boomers retire.
So cheery numbers are probable, but they're no done deal.
And even if they come to pass, you might not notice the prosperity as personally as you'd like.
If you look at the countries around the world that show really big GDP growth -- there's no better example than China -- one of their secrets is very simple: They have masses of under-employed people, and as they draw them into the productive economy their growth rates soar into double digits.
B.C. may see a rich-world variant of that trick, since bringing in migrants has the same effect as bringing marginally productive people into the labour force. And our economy is doing so well that the only way to keep it hopping will be to keep bringing in people -- Stokes estimates we'll need 30,000-50,000 a year.
They will help us build a bigger pie, no doubt about that. But we'll have to slice it into more pieces.
Last year, even though B.C.'s growth rate was the second-best in Canada, our per-capita GDP was only fourth best. Thanks in part to the low base that remains as a legacy of the sluggish 1990s, B.C.'s earned wealth per person actually remained below the national average.
If migration continues as Stokes and the others expect it to, B.C. will need an extra one or two points on its growth rate just to stay even with the pack in terms of GDP per capita.
(prepared by Don Cayo/Vancouver Sun)
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