B.C. is expected to experience slower GDP growth this year and weak growth into next year, according to a report released by Deloitte Canada on Thursday.
The Canadian Outlook: Interest Rate Increases Starting to Hit Home report shows that after a 3.6 per cent GDP growth in 2022, the province expects to have only one per cent GDP growth in 2023 and 0.8 per cent in 2024.
This is close to the Canadian GDP forecast, which is one per cent this year and 0.9 per cent next year. Other provinces are also expected to see modest GDP growth in 2023 and 2024 compared to last year.
“Higher interest rates impact all consumers across all provinces, now in B.C. in particular, household debt as a percentage of income is the highest in the country. So we would expect to see slower growth on the consumer side,” said Dawn Desjardins, Deloitte Canada’s chief economist.
Canadian households are the most leveraged across the G7, which makes them more vulnerable to the multiple interest rate hikes seen since last spring. This in turn impacts consumer spending, according to the report.
Recent forest fires, the Port of Vancouver strike and interprovincial outmigration to Alberta have also had an overall impact on the momentum of B.C.'s economy in recent months, according to the report.
One of the outcomes in a slower economic growth environment is a softer job market. After last year’s tight job market, vacant positions have come down “substantially” compared to a year ago and Desjardins said she expects the number of vacant positions to continue to go down.
“It could be the case that you don't see massive job cuts because a lot of companies had to fight very hard to get their labour markets back up. But you could see the unemployment rate rise because population growth has been so strong,” she said.
However, Desjardins said she believes slower economic growth is a short-term reality. As economic growth slows down across Canada, the Bank of Canada is expected to stop raising interest rates and start looking into lowering them next spring. Improvement in the economy will be seen in the second half of 2024 as the fear of more interest rate increases fades.
The report also noted that despite the recent strike at the Port of Vancouver, the outlook for the trade sector is promising given stronger-than-expected growth in the U.S. Real GDP south of the border is expected to grow by 2.4 per cent this year and 1.2 per cent next year. This continued growth in the U.S., “bodes well for our trade prospects into next year,” according to the report.
Meanwhile, Canada’s population is projected to increase by 2.7 per cent this year – the highest in history. Strong population growth will boost consumption even if each individual consumes less due to budget pressures.
A positive trade outlook and strong population growth will help avoid a deeper recession, according to Deloitte.
