BC faces new risks to the well-being of its economic future from global events as it heads into a key provincial election.
Last week alone, confidence in the world’s economic stability was shaken by a number of factors.
Volatility edged up in global financial markets as Italy’s elections renewed concerns over the European debt crisis when the pro-austerity party led by Pier Luigi Bersani won a slim majority in the country’s lower house but failed to win a majority in the country’s senate.
The next couple of weeks are likely to see continued uncertainty as politicians in Europe’s third-largest economy struggle to build a new coalition.
Failing that, it would have to hold another election, because Italian law requires the country’s government to have a majority in both houses. And even when Italy finds a political compromise, the world will have to deal with Germany’s elections in September.
Closer to home, political gridlock in the U.S. threatens to undermine economic growth in Canada’s largest trading partner as there are few signs that the U.S. federal government will find a long-term solution to address the $1.2 trillion in automatic spending cuts slated to begin March 1.
It could still take months for these global events to influence client confidence for B.C. businesses involved in global trade, but they could affect the relatively rosy forecasts most economists have made for the province’s open economy.
Central 1 Credit Union, for example, noted these global risks in its latest economic forecast for the next five years. It expects B.C.’s economy to grow 2.2% this year and a further 2.8% in 2014 before accelerating to 3.7% on average between 2015 and 2017.
But global volatility, Central 1 noted, could derail the forecast.
“There is a risk that the U.S. or other major economies may not perform as expected or an unforeseen shock event or developments may unfold causing sluggish growth or recession. Without the presumed upturn in U.S. growth during this period, B.C.’s growth would languish around 2% annually.” •
