Conference board predicts GDP increases above 3 % in next 3 years
Fiona Anderson
Sun
British Columbia‘s economy is “sizzling” as a booming resource sector and active construction industry continues to drive growth in Western Canada, the Conference Board of Canada said in a report released Thursday.
The board predicted that the province would see a 3.3-per-cent increase in its real gross domestic product in 2005, a 3.4-per-cent increase in 2006 and three-per-cent growth in 2007.
“That makes B.C. one of the strongest provinces in Canada this year and again next year,” said Marie-Christine Bernard, the conference board’s associate director of the provincial forecast.
The anticipated growth is due to a combination of factors, Bernard said in an interview. There is momentum in construction, both for housing and non-residential, she said, with large projects such as the Richmond-Airport-Vancouver rapid transit project underway, and more projects to start in 2006 as the province readies itself for the 2010 Olympics.
“We can see it in the employment numbers,” Bernard said. “A lot of the jobs that were created were in the construction sector.”
B.C. saw “amazing” job creation in 2005, with more than 80,000 new jobs last year, Bernard said.
“That should help the economy going forward — people having a new job wanting to buy a house [and] spending on retail items,” she said.
High commodity prices have helped the mining sector, while the pine beetle and hurricanes Katrina and Rita have sparked a mini-boom in the forest industry, Bernard said. The province has increased the timber harvest in an attempt to contain the pine beetle infestation, and there is increased demand arising from reconstruction efforts after the damage done by hurricanes, Bernard said.
One limitation to growth may be a scarce labour supply. Alberta, which the conference board predicts will have real GDP growth of 4.6 per cent this year and 3.7 per cent next year, also has a booming construction sector. That means that B.C. and Alberta will be competing directly for the same workers, which may end up pushing the cost of projects up as wages rise.
Inflation, on the other hand, is expected to remain in check with energy prices moderating, Bernard said. So wages may rise more than inflation, leading to real wage increases for the first time in Canada since 1998.
The rosy forecast doesn’t contain any surprises, said Jock Finlayson, executive vice-president of policy for the Business Council of B.C.
“It just confirms that the momentum has definitely shifted to the west,” Finlayson said in an interview.
Provided commodity prices remain high, and China continues to exhibit a hearty appetite for resource-based products, Western Canada should continue to outperform Central Canada, he said.
“But it’s not a 100-per-cent slam dunk. Things can change,” Finlayson said.
The fact that it is the resource-based industries that are leading the charge is interesting, Finlayson said, when just a few years ago people were saying high-tech was the way to go.
GDP in Canada is expected to grow 2.7 per cent in 2005 and 3.1 per cent in 2006.
The Conference Board numbers reflect similar figures released recently, with the TD Bank on Oct. 31 forecasting GDP growth in B.C. at 3.5 per cent, and an RBC Financial Group study on Oct. 26 predicting 3.8-per-cent growth.
WEST IS BEST, FOR NOW
B.C. and Alberta are expected to lead the country in real GDP growth for 2005, with B.C. closing the gap on Alberta considerably in 2006, although by then Newfoundland is expected to take the overall lead thanks to increased oil and mining production.
