Central 1 has downgraded its forecast of B.C.’s 2011 growth from its January prediction, the credit union association announced this morning.
Helmut Pastrick, Central 1’s chief economist, said American and European economic woes have caused him to reduce his B.C. economic growth forecast for 2011 and 2012.
He’s now projecting B.C.’s economy will grow by 2.4% this year, rather than the 2.9% he forecasted in January. For 2012, he’s predicting the province will grow by 2.8%, rather than the previous forecast of 3.1%.
Pastrick said the chief threat to B.C.’s economic growth is the economic struggles in the U.S., given the two countries’ strong trade links.
“I think the U.S. economy will not slip into recession, that’s not my expectation, but it certainly will be a weak growth year – 1.8% this year and next year I have it only at 2.3%,” he said. “And of course their housing market, which is important for our export sector – forestry and lumber – is very depressed.”
Pastrick said he’s predicting 0.8% job growth for B.C. this year and 7.7% unemployment, up from 7.6% last year.
“It’s pretty weak labour market performance – some growth, and most of that tends to be in the Lower Mainland and not so much in the other parts of B.C.”
Pastrick said he waited for the HST referendum results before finalizing his forecast. He said he’s expecting the reversion to a PST/GST system to slow down residential construction in 2012 and increase it in 2013, when the tax transition is slated to occur.
He added he’s expecting business investment to pull forward into 2012 at the expense of 2013.
Pastrick said he’s forecasting the tax change will boost B.C.’s economic growth up to 2015, due to increased consumer spending, but slow it down 10 or 20 years from now.
“That’s mainly because there’s less investment over the long term under the PST/GST.”
Jenny Wagler
Twitter: JennyWagler_BIV