Lower oil prices, dollar to fuel growth in B.C., report says

(January 31, 2015 , posted in Economy)

VANCOUVER — British Columbia is poised to be a top economic performer in Canada, with lower oil prices working to the province's advantage, according to a report by the Business Council of B.C. Real GDP growth is expected to rise from 2.3 per cent in 2014 to 2.6 per cent in 2015 and 3.1 per cent in 2016. Unemployment is expected to drop from 6.1 per cent in 2014 to six per cent.

"In summary, our assessment is that B.C. will enjoy slightly faster economic growth this year than in 2014, underpinned by the rebounding U.S., a weaker dollar, low oil prices and continued low interest rates," concluded the council's B.C. Economic Review and Outlook, written by Jock Finlayson and Ken Peacock.

"By 2016, the province should get a further economic lift with the commencement of a few major investment projects, notably LNG-related, which will add to what may by then be an increasingly broadly-based economic expansion."

There were several other highlights in the report, including the benefits of cheaper oil. "Lower oil prices will work to B.C.'s advantage, as households reap significant savings at the gas pump," the report said. "B.C. produces little crude oil, with imports providing most of the refined petroleum consumed here, so lower prices are an economic plus.

"The downtrend in oil prices is a plus for British Columbia's economy, adding perhaps twotenths of a percentage point to real GDP growth this year and next." The report said that B.C.'s tourism sector will see solid gains in 2015-16, with the U.S. being the major impetus behind the upswing.

"As Americans' confidence grows and their appetite for spending rises, the weaker Canadian dollar and lower fuel costs will make travel to Canada an increasingly attractive prospect. And despite softer economic conditions in Asia, the number of travellers from that part of the world actually increased by more than 10 per cent last year."

However, the report said B.C.'s housing market will likely be in a holding pattern. "Under the weight of high prices and eroding affordability, sales activity may ease slightly, prompting builders to take a more cautious approach to developing new product."

The forestry sector will also gain from the expansion of U.S. home building as well as a weaker Canadian dollar, the report added.

Other highlights included:

B.C.'s job market is gaining momentum.

Consumers in B.C. will spend a bit more than they did in the first half of the decade.

B.C.'s real GDP should increase by 2.6 per cent in 2015, up slightly from 2014.

B.C.'s exports of goods and services should keep rising, thanks to a rebounding U.S. and a sagging Canadian dollar.

If one or more large LNG projects commence in 2016, B.C.'s real GDP growth should accelerate to about three per cent.