It seems everywhere you look for analysis about B.C.’s economy, the problems of its forest industry are the focus. Those observers obviously don’t know that B.C.’s economy has more than two-by-fours going for it.
While forestry is a key export and employs nearly 60,000 people in B.C., it represents only about five per cent of B.C.’s economic production. This is why the province has beaten the national average in economic growth and job creation from 2002 to 2007 while the value of its forest-product exports shrank by 14 per cent.
Just as in the rest of the country, economic activity in B.C. began a steady decline at the end of 2008. A year later, we know that 2009 marked the first annual decline for B.C.’s economy since 1982. However, B.C. is poised to regain momentum faster than many provinces. While the recovery is flat at the national level, many signs show that B.C. edged up faster than the national average during the second half of 2009. This will carry into 2010, for which the prospects are good, and not just because of the Olympic Games’ temporary boost in jobs and tourism. Forecasts call for a rebound in the B.C. economy of about 2.6 per cent in 2010.
The main source of growth for B.C. in 2010 will be infrastructure and housing investment, following a noticeable winding down of non-residential construction in 2009 due to the completion of major Olympics-related infrastructure projects. Public and private capital projects worth an estimated $170 billion over their complete lifespan were planned or underway in the province by the fall of 2009, an increase of four per cent compared to the previous year. As for housing starts, the Canada Mortgage and Housing Corp. forecast of 16,000 in 2009 is half of the previous year’s level, though we should experience a rebound in 2010 (albeit not near the peak achieved earlier in the decade).
Global trade was one of the victims of the recession. B.C.’s exports dropped about 25 per cent in 2009, with most of the decline in lumber (down 26 per cent) and natural gas (down 42 per cent). Things are looking up though. Forecasts for 2010 growth in Asia are more positive than for the U.S., and B.C. will benefit from this, given that our province is the least dependent on the U.S. market. In fact, the value of B.C.’s exports to the U.S. was reduced by one-fifth from 2000 to 2008 while sales to other countries (mainly China, South Korea and Brazil) jumped, led by exports of copper and especially coal, which is now the top export category for B.C.
All this growth will boost job creation. British Columbians are not used to large job losses; they took a pass on the deep 1992-93 recession, gaining jobs while the rest of the country lost plenty. So this economic downturn was a rude awakening for a province that’s created jobs faster than the rest of Canada for five years running. From mid-2008 to mid-2009, only Ontario and Alberta bled jobs faster than B.C. Fortunately, toward the end of 2009, employment in B.C. turned the corner and started trending solidly up, and the Olympics will add a temporary blip.
There’s another benefit (less tangible but longer-lived) that the Games could very well yield. Often when we have visitors in our homes we tend to notice finger marks on the wall and pet hair on the floor, and find it hard to believe that our guests only see the positive. It’s not utopian to imagine that visitors from around the world will discover B.C. and make enthusiastic comments about the food, the spectacular natural environment and the province’s great potential. This in turn will push British Columbians to think beyond the forest industry’s difficulties and acquire the conviction that “the best place on earth” is the best place for investment, innovation and reaching out to new markets.
Jacques Marcil is a senior economist with Canada West Foundation, a Calgary-based think-tank.
