Despite declines in the province's export-based industries, B.C.'s domestic economy remains strong with employment gains and strong retail sales and housing starts, according to B.C.'s second quarterly report for 2007/08.
The high Canadian dollar and economic conditions in the U.S. have been fingered as the culprits for the drop off in provincial exports and manufacturing shipments.
However, the 2007/08 budget surplus forecast increased to $2.1 billion, $525 million higher than the surplus forecast in the first quarterly report.
Compared with that report, the second quarter's 2007/08 forecast for spending is up $110 million, taxpayer-supported capital spending is largely unchanged and taxpayer-supported debt is up $136 million.
"Weaker external conditions have a real impact, "said B.C. Finance Minister Carole Taylor. "Natural resource revenues are now down $754 million from budget."
The 2007/08-revenue forecast is up $635 million from the first quarterly report mainly due to prior year income tax adjustments and a resulting higher estimate of the 2007 tax base.
Exports and manufacturing shipments declined in 2007 as a result of the high Canadian dollar and falling demand and prices for lumber and natural gas.
According to the province, further deterioration of the U.S. economy, volatile commodity prices, the high Canadian dollar and continued instability in global financial markets remain key risks to B.C.'s economic outlook.