British Columbia’s balance sheet shows signs of improvement, with a surplus of $706 million forecast for the current fiscal year, although the longer-term outlook calls for downturns and at least two consecutive deficits.
Preliminary numbers for the first three months of 2022-23 show the province is in a stronger position than expected, Finance Minister Selina Robinson said Monday.
But risks to future economic performance include inflation, interest rates, the conflict in Ukraine and the ongoing COVID-19 pandemic, she said.
“British Columbia’s economy is expected to continue its recovery this year and grow moderately next year as the impact of higher inflation and higher interest rates weighs on consumer spending and makes more expensive loans,” she told a news conference.
“We also have to remember that the pandemic is not over,” Robinson said.
The NDP government forecast a $5.5 billion deficit for 2022-23 last February. But rising revenues from natural resources, income tax and property sales have turned the balance sheet from red to black, she said.
Economic headwinds are changing and slower growth appears to be ahead, Robinson said, adding that economic growth forecasts have been revised down from 4% to 3.2% in 2022, and from 2.5% in 1.5% in 2023.
A budget deficit of $3.8 billion is projected for 2023-24, followed by a deficit of $2 billion in 2024-25.
“But today’s update remains positive,” she said. “Our plan continues to protect the health and livelihoods of people today while building a bridge to economic recovery. A lot of things, and I guess I have to say it again, can change by the end of the year.
The government recently announced that the province’s final audited budget for 2021-22 produced a surplus of $1.3 billion after forecasting a deficit of nearly $10 billion.
Robinson said the previous $9.7 billion deficit forecast was made during the darkest days of the pandemic when the province and other governments were preparing for the worst but hoping for the best.
Last week, the British Columbia government announced a $600 million relief package to help families most in need as the costs of goods and services rise.
Bryan Yu, chief economist at British Columbia’s Central 1 Credit Union, said the economy has strengthened over the past year and the unemployment rate is low, but rising unemployment rates interest, inflation and a declining housing market will slow the economy.
“But I don’t think we’re going to see massive stagnation in the economy,” he said in an interview.
Robinson said the quarterly report provided $1.9 billion in the 2022-23 budget to cover the “additional cost of the shared takeover mandate,” labor contracts, which will include the recent tentative agreement between 33,000 workers. unionized public servants and the province.
She said the government is awaiting the results of the union’s ratification vote and is unlikely to know the exact impact of the settlement on the budget until the next quarterly report due later this year.
“I will report on the second quarter and as soon as the agreements are ratified we will certainly have more to say on how this affects public finances,” Robinson said.
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