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Budget: Surge in housing prices help B.C. economy bounce back through tail-end of pandemic – CKPGToday.ca

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“You can see the unusually high revenue for 2021/22. It doesn’t fully recover in the third year of the fiscal plan,” Finance Minister Selina Robinson said Tuesday.

Those high revenues are driven in part by the double-edged sword of housing.

Buying a home has beyond increasing unaffordable while the increase in property transfer tax continues to support the province’s bottom line.

Property transfer taxes accounted for $1.6 billion in revenues in 2019/20, $2.1 billion in 2020/21 and a staggering $3.25 billion in 2021/22.

The Insurance Corporation of British Columbia (ICBC) has also seen a significant financial rebound.

A shift to a no-fault system, fewer claims than expected and a better than expected return on investments has led the public insurer to contribute an expected 1.9 billion to the government during this fiscal year.

A one-time boost in federal transfers due largely to COVID-19 and flood relief has also led to higher than expected revenues in 2021/22.

“There has been significant improvement,” Robinson said.

“The large number of improvements are one time in nature as our economy has significantly rebounded from the impact of the pandemic. We have been resilient. The main risk continues to be the uncertainty of the pandemic and the lasting impacts of BC, across Canada and around the world.”

The average home sale price in the province increased by 18.7 per cent in 2021 over 2020, following an increase of 11.6 per cent from 2019 to 2020.

British Columbia’s economy has grown by an estimated five per cent in 2021 and is expected to expand by four per cent in 2022.

“Over time, as this elevated response is no longer required our government will return to more balanced practice but our decisions will still need to take into account the health, economic, business, environmental and social indicators that have guided this budget,” Robinson said.

The revenue boost is allowing the government to re-invest in key priorities outlined in the 2020 BC election campaign.

Due to a federal commitment, the province is allocated $284 million for child care.

This is allowing the province to reduce the average infant/toddler fees to approximately $20 per day a reduction by about 50 per cent of current costs.

Preschool and before and after school care costs are also expected to drop to less than $20 a day for the 2023-24 school year.

To support the rising demand for child care, the province has committed to fund 40,000 new spaces over the next seven years and to create 130 more ECE training seats in post-secondary institutions per year.

“This is going to make a real difference. As we know providing child care services is not just a pillar of building a stronger society it also helps build a stronger, more resilient economy,” Robinson said.

Child care advocate Sharon Gregson says this is a good news budget for families with children. Gregson’s expectation is the province will get to the goal of $10-a-day child care by March 31, 2026.

“That is the commitment with the federal money but of course, we are pushing for that to happen sooner,” Gregson said.

The long-term economic picture is expected to be somewhat unpredictable due to the unknown impacts of COVID-19 and the impacts of natural disasters.

The province has earmarked $1.5 billion to respond to flooding events and to rebuild destroyed infrastructure.

This includes an additional $400 million for Emergency Management BC in 2022/23.

BC Wildfire Service will be turned into a year-round service at a cost of $243 million. This added capacity will improve facilities to deal with wildfires.

There will be an additional $210 million for community preparedness and wildfire prevention and Indigenous-led emergency management priorities.

The province has not put a price tag yet on how much a permanent Coquihalla Highway fix will cost. The federal government has already committed $5 billion to support B.C.’s rebuild.

“We need to acknowledge a lot of the repair work has been done and that was tremendous heavy lifting by a lot of people to get this done as quickly as possible. Some would describe this as miraculous,” Robinson said.

“It is really important we understand what it will take and we do the assessment properly. We are optimistic we will have more done on the assessments in the coming weeks.”

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‘Do whatever it takes’: Beijing urged to act as China’s economy falters – The Guardian

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‘Do whatever it takes’: Beijing urged to act as China’s economy falters  The Guardian



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The US economy is 'nowhere near a recession this year,' says an economist—but 2023 is a different story – CNBC

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With turmoil in the markets, high inflation and impending interest rate hikes that will make borrowing money more expensive, many Americans are wondering if the economy is heading toward a recession.

Goldman Sachs chairman Lloyd Blankfein said last weekend that “it’s certainly a very, very high risk factor,” and consumers should be “prepared for it.” However, he hedged his comments by saying the Federal Reserve “has very powerful tools” and a recession is “not baked in the cake.”

Although it is impossible to know for sure, the odds of a U.S. recession in the next year have been steadily rising, according to a recent Bloomberg survey of 37 economists. They have the probability pegged at 30%, which is double the odds from three months ago.

To put that number into context, the threat of a recession is typically about 15% in a given year, due to unexpected events and numerous variables.

The bottom line: “The likelihood of recession this year is pretty low,” says Gus Faucher, a chief economist at financial services company PNC Financial Services Group. However, “it gets dicier in 2023 and 2024.”

What determines whether the economy enters a recession

A recession is a significant decline in economic activity that is spread across the economy and lasts more than a few months, according to The National Bureau of Economic Research, which officially declares recessions.

A key indicator of a possible recession is the real gross domestic product (GDP), an inflation-adjusted value of the goods and services produced in the United States. For the first time since early in the pandemic, it decreased at an annual rate of 1.4% in the first quarter of 2022. Since many economists agree that 2% is a healthy annual rate of growth for GDP, a negative quarter to start the year suggests the economy might be shrinking.

Another factor is rising inflation, which has recently shown signs of slowing down. But it’s still well above the Fed’s 2% target benchmark, with a year-over-year rate of 8.3% in April, according to the most recent Consumer Price Index numbers.

With a high rate of inflation, higher prices outpace wage growth, making things like gas and rent more expensive for consumers. For that reason, the Fed imposes interest rate hikes, as they did in March and May, with five more expected to follow this year. These hikes discourage spending by making the cost of borrowing money more expensive for businesses and consumers.

While many economists still expect the GDP to grow in 2022, the rate by which inflation is decreasing is less clear.

Signs of economic strength

However, there are positive economic indicators to consider as well. Job numbers continue to look good, as the U.S. economy in April had its 12th straight month of job gains of 400,000 or more. And employment levels and consumer spending remain strong, for now, despite interest hikes and inflation.

“Ultimately, inflation in terms of rising prices needs to work its way into actual spending behavior,” says Victor Canalog, head of the commercial real estate economics division within Moody’s.

He points out that consumer expenditures in the U.S. rose by 2.7% last quarter: “People are still spending more, but at what point will they start spending less?”

Despite these positives, risks remain. The Federal Reserve is walking a fine line with its monetary policy, says Faucher, as doing either too much or too little to control inflation could further hurt the economy.

“Rising interest rates are designed to cool off growth, hopefully without pushing the economy into recession,” says Faucher. But he says that if the central bank “raises their rates too much, that can push the economy into recession.”

“That’s why I’m more concerned about 2023, or 2024, because we’ll have felt the cumulative impact of all of those interest rate increases that we’re going to be seeing over the next year and a half.”

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‘Difficult to believe’: Biden’s economy plan a tough sell in Asia – Al Jazeera English

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Phnom Penh, Cambodia – US President Joe Biden’s arrival in Seoul on Friday marks not only the start of his first visit while in office to South Korea and Japan, but the beginnings of an economic initiative aimed at deepening United States ties across Asia.

Though many of the Indo-Pacific Economic Framework’s details have yet to be finalised, the Biden administration has made one point clear – the plan is not a traditional trade agreement that will lower tariffs or otherwise open access to US markets, but a partnership for promoting common economic standards.

While many of China’s regional neighbours share Washington’s concerns about the burgeoning superpower’s ambitions, the IPEF’s lack of clear trade provisions could make it an uninspiring prospect for potential members, especially in Southeast Asia.

“You can sense the frustration for developing, trade-reliant countries,” Calvin Cheng, a senior analyst of economics, trade and regional integration at Malaysia’s Institute of Strategic and International Studies, told Al Jazeera. “There’s always talk about engaging Asia, the idea, but what exactly is it – and what are the incentives for developing countries to take up standards that are being imposed on them by richer, developed countries?”

Since announcing the IPEF in October, the Biden administration has characterised the initiative as a way of promoting common standards under the pillars of fair and resilient trade; supply chain resilience; infrastructure, clean energy, and decarbonisation; and tax and anti-corruption.

A fact sheet distributed by the White House in February describes the framework as part of a wider push to “restore American leadership” in the region by engaging with partners there to “meet urgent challenges, from competition with China to climate change to the pandemic”.

Nevertheless, Biden’s decision not to pursue a major trade deal harks back to the protectionist leanings of former US President Donald Trump, and, in particular, his administration’s abrupt pullout from the landmark Trans-Pacific Partnership (TPP).

Trump, whose antipathy towards traditional alliances sparked anxiety in many Asian countries, scuttled that agreement in 2017 despite sharing the deal’s aims of countering expanding Chinese economic influence.

Yoon Suk-yeol
South Korean President Yoon Suk-yeol has expressed support for Biden’s new economic initiative [File: Seong Joon Cho/Bloomberg]

But even without clear benefits to boost trade, Asian leaders have, for the most part, reacted favourably to the prospect of renewed US engagement in Asia.

Longtime allies Japan and South Korea are expected to be among the first to engage with the IPEF, as are Singapore and the Philippines.

From Vietnam, Prime Minister Pham Minh Chinh said at the recent US-ASEAN summit that Vietnam “would like to work with the US to realise the four pillars of that initiative”.

However, he added that Vietnam needed more time to study the framework, as well as to see more “concrete details”.

Thailand has also demonstrated interest, while leaders in Indonesia and India have yet to take a clear position.

Huynh Tam Sang, a lecturer of international relations at the University of Social Sciences and Humanities in Ho Chi Minh City, said Hanoi wished to avoid antagonising either the US or China – a common position for Southeast Asian states attempting to stay clear of great power struggles while avoiding being dominated by their northern neighbour.

“The Vietnamese government has been rather prudent not to showcase any intentions to join the IPEF or not, though I think there are many benefits to joining,” Sang told Al Jazeera, listing clean energy and reliable supply chains as common interests.

Sang said, however, that other standards, such as those related to taxes and anti-corruption efforts, could be a step too far for the Vietnamese government.

“I think Vietnam could be really reluctant to join that pillar for fear of the US intervening in Vietnam’s domestic politics,” he said.

“The anti-corruption campaign is definitely going on, but many Vietnamese are very sceptical of this view of cooperation, especially with the US when the Biden administration has prioritised democratic values when fostering ties with regional countries.”

Strings attached

Such concerns could undercut the renewed US engagement, particularly when China has made a point to engage in trade without such values-based strings attached. The Regional Comprehensive Economic Partnership (RCEP), a free trade deal that went into effect at the start of this year, is a testament to that hands-off approach to some observers.

China played a key role in negotiating the RCEP, which also includes Japan and South Korea, plus all 10 of the ASEAN member-states –  Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam – as well as Australia and New Zealand.

In total, the RCEP covers some 2.3 billion people and an estimated 30 percent of the global economy. The partnership is widely seen as being more focused on promoting trade by removing tariffs and red tape, with a less holistic approach to raising economic standards than the TPP or its successor, the reassembled Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP).

Cheng described the CPTPP, of which the US is not a member, as the “gold standard” for trade deals in the region, noting its commitment to expanded trade access as well as provisions to safeguard labour rights, promote transparency and address environmental issues and climate change.

“So the IPEF is pretty much that, but taking out the trade deal aspect of it, leaving just the standards,” he said.

It remains to be seen how far the standards-only method will go in terms of winning acceptance across Asia.

Malaysian Prime Minister Ismail Sabri Yaakob
Malaysian Prime Minister Ismail Sabri Yaakob has called on the United States to take a more comprehensive approach to trade [File: Samsul Said/Bloomberg] (Bloomberg)

Already, Malaysian Prime Minister Ismail Sabri Yaakob and international trade minister Azmin Ali have said the US should take a more comprehensive approach.

Ali described the framework proposal in an interview with Reuters as a “good beginning for us to engage on various issues” and said Malaysia would decide which IPEF pillars it would consider joining. At the same time, he made clear the IPEF was not a replacement for the more-comprehensive TPP.

Some of the most straightforward public criticism of the new framework on that front has come from prominent former ministers in Japan, one of the region’s most steadfast US allies.

Earlier this month, former foreign minister Taro Kono and former justice minister Takashi Yamashita spoke at an event in Washington of the new framework’s lack of hard commitments, an aspect they found glaring in the context of the abrupt collapse of the TPP. In their comments, the two maintained the IPEF would only serve to undermine the CPTPP.

“Now the Biden administration is talking about the Indo-Pacific Economic whatever, I would say forget about it,” Kono said.

Hiroaki Watanabe, a professor of international relations at Ritsumeikan University in Kyoto, said the US withdrawal from the TPP had undermined Japanese perceptions of the IPEF’s stability. Though Biden may promote his framework while in power, Watanabe said, there was no guarantee the next president would.

“Right now, it’s the Biden administration, but we don’t know what will come next – it could even be Trump again,” Watanabe told Al Jazeera.

“From a non-American perspective, it’s really difficult to believe what America is saying when it says it wants to commit itself to these plans,”  Watanabe added. “There are many challenges to the logistics of this, and then the US may just throw away the kind of commitment as measured by the IPEF in the future. Practically, it’s not meaningless, but it’s not significant either.”

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