Liberals tout $2.8B surplus
B.C.’s continued economic strength surprised forecasters, resulted in a higher-than-expected $2.8-billion surplus and allowed the B.C. Liberals to make a slew of new promises in their throne speech last week.
Strong job growth, a hot housing market, high retail sales and exports, a recovering global economy and rising commodity prices have all boosted the province’s revenue and real gross domestic product, according to members of the economic forecast council.
“The economy has been much stronger than pretty much anyone anticipated,” said Ken Peacock, chief economist for the Business Council of B.C.
An unaudited fiscal update released by provincial Finance Minister Mike de Jong on Wednesday says the surplus in the 2016-17 fiscal year helped reduce the province’s taxpayer-supported debt by $1.2 billion, while its operating debt decreased by $3.4 billion.
The Liberals campaigned in last month’s election on a platform of fiscal restraint and criticized the NDP for making costly promises, but in the throne speech last week they adopted many of the NDP proposals, totalling $2.6 billion in new spending over three years.
De Jong said the Liberals based their February budget and campaign platform on projections from the economic forecast council, which at that time had an “abiding pessimism,” and he only learned of B.C.’s stronger finances from the council on June 6.
“We didn’t think we had that money in February,” he said.
De Jong said GDP growth in 2016 dramatically outstripped forecasts. The budget forecast 2.4 per cent growth, while actual growth was 3.7 per cent, he said.
The economic forecast council predicts 2.9 per cent growth in 2017, up from its January forecast of 2.3 per cent.
“It’s common for GDP to fluctuate quarter to quarter, and it can fluctuate quite dramatically,” said Cameron Muir, chief economist with the B.C. Real Estate Association and council member.
“We’ve all increased our forecast since then as a result of incoming data that shows a much better performance than we saw in the fall.”
Peacock said the forecast council does its projection each November and has the opportunity to tweak it in January, and the first time anyone would have realized they had underestimated B.C.’s growth was at the beginning of June, when Statistics Canada released its estimate of the province’s GDP growth.
“Before the Statistics Canada number coming out, it’s people running their own models and doing their own assessment,” Peacock said. Peacock guessed that officials in the Ministry of Finance, who tend to be more conservative in their estimates, were as surprised as everyone else.
The NDP and Greens, which won a combined 44 seats in the election, have agreed to bring down the Liberals, with 43 seats, in a confidence vote today, with the aim of allowing the NDP to form a minority government.