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Canada's economy is in a funk, so are some British Columbians

Inflation, income stagnation, growing household debt lead British Columbians to feel they are in a 'personal recession'
From left, Stewart Muir (Resource Works), Shannon Young (Petronas), Jack Mintz.

B.C. and Canada are not in a recession, but on an individual level, many British Columbians may be experiencing what feels like “a personal recession.”

That’s how Lisa Sparrow, CEO of Corix and chairperson of the Business Council of B.C. characterized how many British Columbians are feeling about the economy and their own personal financial situation.

Inflation, income stagnation, and growing household debt all add up to less buying power.

“You’re experiencing a personal recession,” Sparrow said during a fireside chat with former B.C. Liberal premier Christy Clark Monday the the BCBC's annual B.C. Business Summit.

“Maybe the total GDP is not in decline, but your share of the GDP is in decline. That is a recession for you, personally. You actually do have less money.”

British Columbians who feel that way are not imagining things. According to Dave Williams, vice president of policy for BCBC, Canadians are labouring under greater household debt and income growth is stalling.

The mortgage burdens Canadian have now is higher than in the early 1990s, when mortgage rates were at 17 to 18 per cent, Williams said. Forecasts are that GDP per person in 2028 will be lower than in 2022 in B.C.

Governments are also labouring under growing debt burdens. This year, B.C. will run a deficit of $8 billion – about 1.9 per cent of GDP – Williams noted.

“That’s a record in the history of B.C. And next year we’ll run a deficit of about the same. And we’re doing that in a context of unemployment being relatively low.

“These are quite significant deficits going into the future, and it’s not escaped the notice of credit rating agencies.”

For five years, B.C. led the country in per capita GDP growth, Williams said, while Canada’s overall growth was flat.

“Canada has gone sideways for the past five years, with no growth,” Williams said.

But B.C.’s relatively better performance was largely attributable to four energy mega-projects – Site C dam, LNG Canada, Coastal GasLink, and the Trans Mountain pipeline expansion – that pumped $68 billion into the economy.

These projects, which are now either winding down or finished, accounted for about 0.4 per cent of B.C.’s GDP in recent years, Williams said.

“Had we not had those mega projects, our growth would have been much closer to the Canadian experience,” Williams said.

Williams said there has been little private sector job creation in B.C. since 2019, and that self employment has also been stagnating. Public sector jobs, on the other hand – i.e. government jobs – have increased.

“So the private sector hasn’t been very well in B.C. over the last few years,” Williams said. “The public sector has been doing very well. We’ve seen more than a one-fifth expansion in the public sector.

“One new private sector job is supporting 5.5 new public sector jobs. That arithmetic is just not going to be sustainable for very long.”

Forecasts are that GDP per person in 2028 will be lower than in 2022. That is tantamount to a decline of $6,500 per person in 2028 compared to what British Columbians would make if B.C. had recovered to pre-pandemic levels, Williams said.

At the national level, Canada’s economy is in “a funk,” said Canadian economist Jack Mintz, president's fellow at the School of Public Policy at the University of Calgary.

“We’ve had a falling standard of living,” Mintz said. “Typically we are about 90 per cent of U.S. per capita incomes. Now we’re at 70 per cent and sliding further.”

“We’re facing a capital drain, we’re facing a brain drain, we’re having more people leaving the country.”

One recurring theme at Monday’s business summit was the potential for Canadian resource industries to prime both provincial and national economic engines.

But government policies, notably climate action strategies, are seen to be throttling resource sectors, especially oil and gas sectors.

Canada is losing some of its competitive edge to other countries, notably in the natural gas and LNG space, said Shannon Young, vice president of sustainability and external affairs for Petronas Canada.

Petronas is one of the partners in the LNG Canada project, and was also behind the $36 billion Pacific Northwest LNG project, which it ultimately abandoned.

“When you look at our portfolio within the Petronas group, we are competing with other jurisdictions,” Young said.

“We’re looking at LNG and natural gas development -- including the UAE and Brazil, Argentina -- and we are seeing a capital flight out of British Columbia and into those other jurisdictions.

Thanks in part to LNG exports, Young said natural gas royalties in B.C. are expected to double to $1.4 billion by 2027.

“A big question mark is how do you achieve that without growth and investment in natural gas and LNG?”

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