B.C. Economy to Grow About 3% a Year Over Next Three Years, Central 1 Predicts; Construction Industry Will Drive Recovery

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Jan. 13, 2011) - B.C. will enjoy moderate economic growth of about three per cent a year for the next three years, says an Economic Analysis of British Columbia released today by Central 1 Credit Union.

The latest forecast shows the B.C. economy growing more quickly in 2011 than had been expected in October. Real gross domestic product (GDP) will expand by 2.9 per cent this year, up from the 2.4 per cent forecast a few months ago.

"Our modest upward revision is due to higher growth expectations in the United States and Canada and new data from Statistics Canada," said Helmut Pastrick, Central 1's chief economist.

The B.C. economy grew by 3.6 per cent in 2010, powered by the 2010 Winter Olympics. Pastrick expects growth will be about 3 per cent in both 2012 and 2013, less than he had previously forecast, because natural gas prices have weakened. As well, fewer major mining and energy projects are expected, which will lower investment spending.

Government spending is expected to decline in 2012 and 2013 as economic stimulus programs end and efforts continue to reduce the deficit.

Unemployment will continue to be high, but the jobless rate will decline from the current 7.6 per cent to 7.3 per cent this year, 6.7 per cent next year and 6.1 per cent in 2013.

"Moderate job growth and a growing labour force will keep annual wage increases in the 2 to 3 per cent range," Pastrick said.

B.C.'s population is expected to grow at a slower rate later on because Alberta's hotter economy will attract job hunters.

The construction industry will show the highest growth rate among domestic industries as residential and private non-residential investment increase in the next three years.

Domestic sectors will continue to be the main driver of the economy, aided by a pickup in the hard-hit lumber industry. Exports will be constrained by the high Canadian dollar, which is expected to remain near parity with the U.S. dollar for the next three years.

Interest rates are expected to rise by one percentage point in each of the next three years, which will affect the housing sector, while the rest of the economy should cope well, the forecast predicts.

If the Harmonized Sales Tax (HST) referendum results in its removal and replacement with the Provincial Sales Tax (PST), it will alter both consumer and business spending forecasts and government revenues, Pastrick noted. Consumer spending will increase a bit, particularly in sectors such as restaurants. The tax change would reduce business investment and such a flip-flop on an important tax policy would undermine business confidence. The switch back to a PST would also reduce government revenue and increase the deficit.

The complete report is available at:

http://www.central1.com/publications/economics/pdf/ea/ea%202011_01.pdf

Note to media: Helmut Pastrick will be speaking at the Vancouver Board of Trade's Economic Outlook 2011 today (Thursday, January 13) from 8-10:30 a.m. at the Fairmont Hotel Vancouver and will be available at the event.

Central 1

Central 1 is the central financial facility and trade association for the B.C. and Ontario credit union systems. Central 1 represents a consumer-oriented, full-service retail financial system that serves 2.9 million members and holds $70 billion in assets, and is owned primarily by its member credit unions, 45 in B.C. and 126 in Ontario.

With offices in Vancouver, Mississauga, and Toronto, Central 1 provides a wide range of services such as liquidity management, direct banking, and flexible payment service solutions. For more information, visit www.central1.com.