Global Problems Mean B.C. Economy Will Grow Slowly, Central 1 Forecasts

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Sept. 8, 2011) - The economic forecast for British Columbia is gloomier than it was in January, says the latest Economic Analysis of British Columbia released today by Central 1 Credit Union.

The continuing global economic slowdown is longer and more severe than anticipated earlier this year due to the European debt crisis, the political wrangling over the U.S. debt ceiling and the tsunami in Japan.

The latest forecast predicts the B.C. economy will grow by 2.4 per cent this year compared to the 2.9 per cent that was forecast in January. Next year will see growth of 2.8 per cent, down from 3.1 per cent projected earlier. The B.C. economy grew by 3.8 per cent in 2010, largely powered by the Winter Olympic Games. The province's Gross Domestic Product (GDP) is expected to increase by 3.5 per cent in 2013 and stay about 3 per cent annually to 2015.

"Signs point to our recovery continuing, but at a modest pace, with a higher risk of recession," said Helmut Pastrick, Central 1's chief economist. "We will grow at a faster pace when the U.S. economy gains momentum."

The recent decision to end the Harmonized Sales Tax (HST) and return to a system with a Provincial Sales Tax (PST) and Goods and Services Tax (GST) will boost consumer spending and residential investment in the short term, since fewer items are taxed, but in the longer term the economy will see less business investment and lower productivity than under the HST, Pastrick said.

The HST change is expected to spur housing construction in 2013 and shift some buying to that period when taxes are lowered.

Job growth will be slow and unemployment will remain high, not falling below 7 per cent until later in 2013. This year the unemployment rate will rise slightly to 7.7 per cent from 7.6 per cent in 2010. The earlier forecast expected the rate to drop to 7.3 per cent.

Net job growth in 2012 will improve to 1.7% but remain unspectacular. Job growth will then gain momentum, rising to 2.7% in 2015.

The fastest growing industries between now and 2015 will be forestry, mining, wood products manufacturing, primary metals manufacturing and construction. The slowest growth will be in government services and education, as governments struggle with large deficits.

Interest rates will remain low and are expected to rise only moderately later in the five-year forecast period. The Bank of Canada is not expected to raise rates until mid-2012 at the earliest.

The complete report is available at http://www.central1.com/publications/economics/pdf/ea/ea%202011_3.pdf.

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 $74.7 billion in assets. It is owned primarily by its member credit unions, 45 in B.C. and 116 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.