B.C. Fiscal Update
COVID-19 is demonstrating in real-time that the economy is inseparable from the health and wellbeing of the people.
Under normal circumstances, the billions in red ink spilled by B.C. Finance Minister Carole James today, within a year of a likely election, would also foreshadow a devastating political deficit for B.C.’s NDP government at the polls. But these, of course, are not normal circumstances. As the human and fiscal toll of the COVID-19 pandemic continues to sink in around the world, public opinion polls suggest John Horgan’s steady minority government would secure a strong majority mandate if an election were held today.
The numbers released today are sobering. 235,000 net jobs lost since February. Over $6 billion in lost revenue layered upon $6 billion in response and recovery spending earmarked so far, creating a forecasted operating deficit of over $12 billion for 2021. A debt-to-GDP ratio set to rise from 15 to 22 percent within a year.
But all things considered, the finance minister could also credibly point to signs of hope today without resorting to political spin. B.C. has flattened the curve better than most jurisdictions, and as James was quick to point out, a strong public health response creates a solid foundation for economic recovery. Add to that a balanced budget and AAA credit rating heading into the crisis, and it’s not hard to see why many private sector forecasts expect B.C. to be among the fastest provinces to rebound from the current economic malaise. Surprisingly resilient housing prices are also easing risk that the NDP measures to cool an overheated market in 2017 might backfire if prices fall too low. Key economic risks remain, including whether B.C. will be able to effectively compete with more aggressively business-friendly jurisdictions for investment in the months ahead.
Despite the risks, Horgan’s government has gotten a lot of things right. Deferring the lion’s share of COVID communications to Dr. Bonnie Henry from day one of the pandemic, and making an early decision to not disrupt the construction and industrial sectors any more than necessary, were crucial early decisions. Add an almost historically cautious NDP budget introduced on the eve of the pandemic in February, which still found room for a historic three-year capital spending plan, and B.C.’s economy is well positioned for a strong recovery.
At the same time, the BC Liberals continue struggling under leader Andrew Wilkinson, with Richmond-Queensborough MLA Jas Johal increasingly outshining his leader in the media. These ongoing challenges suggest the BC Liberals will have a very difficult path back to government without a course correction. For their part, the BC Greens look directionless and beset by infighting, with an otherwise sleepy leadership campaign likely to elect Cowichan Valley MLA Sonia Furstenau as their new leader in mid-September.
There were also a couple more immediately practical takeaways from today’s message. The government won’t unveil its “recovery framework” until September. James also repeatedly suggested that the $30 billion capital spending plan announced as part of her February budget will serve the province well in terms of needed economic stimulus spending in the months ahead, though she was careful to avoid ruling out further capital spending. Indeed, additional capital spending as the election approaches is all but certain. But the rollout of any new funding is likely to be coordinated to some extent with the federal government, which is also expected to release stimulus funding targeted at many shared priorities.
James didn’t need to oversell her government’s response or overexplain the looming deficit. She has the quiet confidence of a prudent leader who was prepared for the storm. She also has the consent of the public and business community to run deficits, at least for now. And for a government that has, at times, struggled to explain that “people are our economy” as James put it today, the meaning of their intended message may finally now be starting to resonate, thanks to their handling of this global health crisis. COVID-19 is demonstrating in real time that the economy is inseparable from the health and wellbeing of the people, much better than any politician could ever articulate.
BC’s 2020/21 Economic and Fiscal Update can be viewed here.