Forecasts suggest GDP could drop by up to 12%; it dropped 5.1% and 89% of lost jobs gave been restored
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B.C.’s economy has weathered the COVID-19 pandemic better than expected, economists say, but there may still be pain to come as government support programs end.
In the early days of the pandemic, in March, 2020, the Business Council of B.C. forecast an unprecedented seven to 12 per cent drop in gross domestic product, a measure of the total value of the economy.
But recently, the B.C.-government appointed economic forecast council estimated the province’s GDP had declined 5.1 per cent in 2020. A recent Statistics Canada estimate pegged the decrease at about four per cent.
Economists agree the pandemic’s effect has not been even across the economy. Those in construction, export and resource industries, and in service and technology sectors that could work at home have fared better than those, for example, working in restaurants, pubs and hotels.
The B.C. government’s restart plan announced last week sets out steps for reopening some of those hard-hit areas, including lifting provincial travel restrictions on June 15 and allowing casinos and nightclubs to reopen on July 1. Larger gatherings such as concerts may be allowed by Sept. 1.
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The eased restrictions are tied to increased vaccinations of British Columbians, with nearly 70 per cent of adults in the province already having at least one dose.
“I would say the B.C. economy is in pretty good shape. It’s pretty healthy,” said Ken Peacock, chief economist and senior vice-president at the Business Council of British Columbia.
Peacock said the business council’s more severe forecast didn’t materialize because B.C.’s lockdown in the spring of 2020 didn’t last as long as expected, massive government spending has supported businesses and individuals, and many businesses have adapted better than anticipated.
Harder-hit sectors like food services, accommodation and culture and entertainment will be helped by the phased restart plan, he said.
International travel remains more of a question mark, although a reopening of the U.S. border with Canada, expected sometime this year, will also be a boost, he said.
Jeremy Stone, the director of Simon Fraser University’s community economic development program, says a concern as restrictions ease is whether businesses that have used up savings or borrowed money will be able to survive.
That will be clearer when government support programs are eliminated, said Stone, who helped co-manage a $20-million grant and loan program following Hurricane Katrina that devastated New Orleans in 2005.
Stone said he expects some businesses will continue to go under even as restrictions are lifted.
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Businesses may have put so much money into staying afloat during the pandemic they don’t have the capital to deal with day-to-day problems such as a refrigerator breaking down, noted Stone.
And retailers may have to deal with changed buying habits of people, such as buying online or a change of priorities, where spending does not go into consumer goods such as a diamond ring, he said.
“I think this is a very tenuous time … the next six months to a year for all businesses, regardless of whether or not we’re fully reopened,” said Stone.
Bryan Yu, Central 1 Credit Union’s chief economist, said the economy has performed better than expected.
A recent forecast by Credit 1 has the province’s economy growing 4.2 per cent this year and by 4.5 per cent in 2022 before slowing to below three per cent in 2023.
Forecast seven per cent growth in the U.S. economy will also help, said Yu.
He noted that B.C. has already regained 89 per cent of jobs lost during the initial stages of the pandemic, but tourism-related employment remains sharply below pre-pandemic levels.
The restart will help the harder-hit sectors, said Yu.
“That’s as long as we can maintain this trend of lower COVID cases as well as the hope we won’t see some spike in new variants that could kind of derail this process,” he said.
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COVID-19: B.C. economy in better shape than expected when pandemic first hit - Vancouver Sun
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