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B.C. economic growth to hit negative territory in 2024: Desjardins

B.C.'s economy relies more on the housing market than most provinces. It's a factor that is set to hammer GDP growth next year, according to forecast.
Desjardins predicts that GDP growth in B.C. will hit -0.1 per cent in 2024, according to its newly released provincial outlook. | Chung Chow, BIV

Negative economic growth is expected to engulf B.C. through to the end of next year before rebounding in 2025, according to Desjardins’ latest provincial outlook released last week.

The financial institution sees the economy contracting, hitting -0.1 per cent growth in 2024. That’s down from 2023’s forecasted GDP growth of 0.7 per cent. 

It will be the first time growth has dipped into negative territory since 2020. The only other province forecasting negative growth next year is Ontario (-0.1 per cent).

This contraction is expected to lead to slower employment growth for B.C. (+0.1 per cent) next year, the lowest since 2021. The unemployment rate is expected to rise to 6.9 per cent, up notably from the 2023 forecast of 5.4 per cent.

Meanwhile, the inflation rate is expected to drop to 2.2. per cent in 2024 from a high point of 6.9 per cent in 2022.

“We expect growth to slow from where it is now towards the end of next year across the country, impacted primarily by much higher interest rates than we're used to seeing,” said Marc Desormeaux, principal economist of Canadian economics at Desjardins.

“And for B.C., because it's a housing-oriented, highly indebted economy, there is a risk of a greater slowdown there than in other parts of the country.”

B.C. and Ontario have the most housing‑oriented economies and the most indebted households in Canada. The Canadian economy still hasn’t experienced the full impact of the sharp rise in borrowing costs. As it does, these two provinces could feel the pinch the most, according to the report.

Softer-than-anticipated exports this year is another big contributor to B.C.’s expected slower growth in 2024, according to the report. 

“The drag on provincial growth from net exports in the second quarter suggests that weak lumber production and exports in the first half of this year have had an impact. The Port of Vancouver strike added to that weakness in July,” the report said.

“Despite a bounce‑back in August, container volumes are below recent levels. Soft natural gas and forest product prices, combined with expectations of weak growth in China, also bode poorly for trade given the province’s close economic ties to that country.”

The biggest impact of a slower economy is that it slows the rate of sales activities, said Desormeaux.

“All else equal, we would expect a slower economy to translate into softer sales and profits across all businesses,” he said.

But Desormeaux said the tight labour market experienced in the province will limit the extent of the downturn so there will be fewer job losses than there have been in the past.

Despite the challenges B.C.’s economy is facing, it has one of the lowest public debt burdens of any province in Canada, so there is room for the province to offer economic support in the event of an economic slowdown, according to Desormeaux.

“There are advantages to this province going forward: it's got a diversified economy, it's got a strong fiscal position. So these can help to guide through any upcoming periods of challenging economic growth,” he said.

“The better news is that we do think that inflation will increasingly ease after this challenging period where we have this painful medicine of sharply higher interest rates, inflation is coming down and we're optimistic that growth will become more stable over time.”

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