The key growth sectors in B.C. last year will also be the key sources of economic decline in 2012. That's according to BMO's latest outlook report for B.C.
The bank forecasts the province's economy will grow by 2.3%, down from 2011's 2.9% GDP increase.
Sherry Cooper, BMO's chief economist, told Business in Vancouver in an interview that a cooling of B.C.'s "famous" housing sector, lower exports to China and continued stagnation in the U.S. economy will be key contributors to this year's slowdown.
She expects the mining sector to face continued challenges associated with slumping economic growth in the world's second- largest economy. The forestry sector, which welcomed record lumber exports to China, will likely be hit by the slowdown in the Chinese housing sector.
Cooper called the current state of the housing market a healthy correction. The BMO report noted that average housing prices have fallen 3.1% year-over-year in March compared with a 20%-plus increase in the same period last year.
While she thinks there's some overbuilding in the housing market, she doesn't characterize it as a bubble about to burst.
While there has been a steady outflow of British Columbians to Alberta in recent months, B.C.'s market will continue to be supported by a continued net population increase from strong immigration.
Given continued volatility and decreased appetite from foreign investors, she said that publicly traded resource companies will continue to face challenges accessing capital markets.
"The Canadian stock exchange is underperforming, making it less attractive for U.S. investors in the mining sector. It's only been in the past three months that there's been stepped-up nervousness."
However, until the Bank of Canada increases its benchmark interest rate, companies will continue to have access to affordable traditional financing.
"Those who can tap the financial markets should do so. Interest rates are very, very low. Some can borrow in the corporate bond market. Others can borrow from the banks. There remains lots of commercial credit available." •
