The economic recovery from the COVID-19 pandemic will take longer than originally expected, with British Columbia among the provinces best positioned to rebound, the Conference Board of Canada suggests.
The Ottawa-based think tank predicts Canada’s real gross domestic product will fall by 8.2 per cent this year and that it will take until the end of 2021 for the country’s economy to return to its pre-pandemic output.
But the Conference Board also projects that in B.C., real GDP will fall by just 5.5 per cent this year and grow by 6.7 per cent in 2021.
“B.C. was very successful in containing the virus early on so that managed to dampen the impact of the closures, it dampened the impact on the labour market, and already we are seeing a fairly good situation because of that,” said Pedro Antunes, the board’s chief economist.
“B.C. is facing a deep recession nonetheless, it’s just relatively better than other provinces this year.”
The quarterly report looked at each province and found that while Alberta, Saskatchewan and Newfoundland and Labrador avoided the high COVID-19 infection rates that plagued Ontario and Quebec, they were hit by low oil prices.
The board looked at regional differences ranging from the shuttering of Nova Scotia’s Northern Pulp mill to trade agreements affecting Saskatchewan’s fertilizer and potash industries.
The report says B.C., on the other hand, has not only limited COVID-19’s spread but has also received a boost from construction, major energy projects and a strong balance sheet at the provincial government level.
Overall, the report found that people are quickly being rehired to work B.C.’s hardest-hit industries, including construction, retail, hotels and restaurants.
“What’s really driving the B.C. economy is this huge liquified natural gas project developing in the province,” Antunes said.
“This pandemic is strange, in the sense that incomes have been really well supported through the crisis. So home renovation, construction, and home building is holding up a lot better than we thought it might early on, and that is supporting the forestry sector.”
By contrast in Alberta, consumer confidence has faltered as businesses plow money into debts accumulated during the shutdown. The Conference Board noted that for Alberta’s oilsands mines, stopping production is costly because there are fixed, ongoing expenses that aren’t covered by current oil prices.
Alberta is projected to bounce back in 2021, but Antunes said it is “not a good news story,” since the economy is coming back off such a low baseline.
One factor that could bolster oil prices going forward, said the Conference Board, is increased demand for transport and travel, which has been restricted by the pandemic.
Restoring travel levels will be key for other provinces as well. The lack of travel has pinched the tourism sector in Prince Edward Island, the aerospace manufacturing industry in Manitoba and immigration levels in Nova Scotia, the Conference Board said.
“Eastern Canada and some of the smaller provinces were less hit by the virus itself,” said Antunes.
“But when you look at the sectors in particular – things like accommodation, anything associated with tourism, anything associated with air transportation, flight simulator technology, aerospace companies, manufacturing branches _ all of this is going to face a much longer recovery.”
The report also keyed in on provinces beset by their connections to the U.S., where the outlook “could change sharply if the current surge in COVID-19 cases … isn’t brought under control quickly.” In Ontario, auto exports to the U.S. hinge on customers coming to dealerships, while New Brunswick manufacturers also rely on the U.S. market, the report said.
“We are an economy, in general, that’s very dependent on trade,” Antunes said.
“We have seen the U.S. being not very successful at all at containing the virus? We need the U.S. to do well through this crisis if we are to do well as a nation.”
The report authors said their forecasts assume that a COVID-19 vaccine will be offered in Canada by June 2021 and that there will be no national lockdown for COVID-19 containment going forward, although there may be regional shutdowns.
Still, the board’s report raised concerns about an uptick in COVID-19 cases in some provinces that were previously able to re-open businesses, such as B.C. and Quebec. The report said clusters of COVID-19 in B.C. are a “cause for concern,” noting that Ontario’s higher case count was more easily offset by work-from-home options for the financial sector.
“(Early) measures allowed Quebec to restart non-essential industries in May, earlier than other provinces, and this has mitigated the damage to the balance sheets of many Quebec households and businesses,” said the report.
“However, there may be a price to pay for these earlier reopenings.”
This report by The Canadian Press was first published Aug. 24, 2020.