B.C. government should keep an eye on debt

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

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.