B.C. govern­ment should keep an eye on debt

Eco­nomic growth is strong de­spite loss of projects, writes Lori Mathi­son.

Vancouver Sun - - OPINION - Lori Mathi­son is pres­i­dent and CEO of the Char­tered Pro­fes­sional Ac­coun­tants of Bri­tish Columbia. The B.C. Check-Up is avail­able at bc­checkup.com.

B.C.’s GDP-growth rate, es­ti­mated at 3.7 per cent, led Canada in 2016. Eco­nomic growth was driven by in­creased hous­ing ac­tiv­ity and ser­vice de­mand, which led to 73,300 new jobs. Pri­vate, non­res­i­den­tial build­ing in­vest­ment had favourable gains. Th­ese fac­tors, com­bined with low pro­vin­cial debt and a strong credit rat­ing, con­tinue to po­si­tion B.C. as an at­trac­tive place to in­vest.

Ac­cord­ing to B.C. CheckUp, pri­vate, non-res­i­den­tial build­ing construction in­vest­ment rose by 12.8 per cent in 2016 to $4.4 bil­lion. With the ex­cep­tion of a down­turn in 2014, this in­crease marked the fifth year of steady in­vest­ment growth, with a 20.1 per cent gain between 2011 and 2016. Com­mer­cial in­vest­ment ac­counted for 64 per cent of pri­vate construction in­vest­ment last year, driven by the construction of of­fice build­ings and shop­ping cen­tres, par­tic­u­larly in south­west B.C.

How­ever, between 2015 and the end of 2016, our prov­ince saw the to­tal value of cap­i­tal in­vest­ment in ma­jor projects de­crease by 3.4 per cent, to $436.9 bil­lion. Pro­posed liq­ue­fied nat­u­ral gas projects ac­counted for the ma­jor­ity of th­ese ma­jor projects. The can­cel­la­tion of Petronas’ Pa­cific North­West LNG project and un­cer­tainty sur­round­ing the re­main­ing LNG projects will have short­and long-term reper­cus­sions.

Our prov­ince’s to­tal net debt reached $42.3 bil­lion in 2016. How­ever, ac­cord­ing to the B.C. Check-Up, B.C.’s net debt-to-GDP ra­tio de­clined by 0.6 per­cent­age points to 15.3 per cent in fis­cal year 2016-17, one of the low­est in the coun­try. This was due to B.C.’s strong eco­nomic per­for­mance, which al­lowed the pro­vin­cial govern­ment to ta­ble a bal­anced bud­get. It is im­por­tant that B.C.’s debt level con­tin­ues to be top of mind to up­hold our triple-A credit rat­ing and sup­port a pos­i­tive in­vest­ment cli­mate.

B.C. re­mains in solid fis­cal shape. While there is fore­cast eco­nomic growth for 2017 and 2018, it will be slower than the growth ex­pe­ri­enced in 2016. The in­crease in pri­vate, non-res­i­den­tial build­ing bodes well for B.C.’s eco­nomic prospects. And while progress on some of its ma­jor construction projects has stalled, B.C. should re­main an at­trac­tive place to in­vest.

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