Last year, strong vaccination uptake and the reopening of the economy helped Canada rebound from the Covid-19 pandemic slowdown. In the OECD’s latest figures, Canada’s economy grew by 4.8% in 2021—but remained lower than the OECD’s and global averages of 5.3% and 5.6%, respectively. Targeted government support programs boosted household incomes and enabled business recovery, providing stability and resiliency to the economy. However, inflationary pressure, virus variants, and an uneven sectorial recovery pose ongoing short- and medium-term challenges to growth. According to the OECD’s Economic Survey of Canada 2021, these challenges could be elevated should the fallout from hard-hit sectors such as leisure, travel, and entertainment begin to impact the rest of the economy. However, fiscal stimulus measures and growth in the United States—Canada’s largest trade partner—could help boost export-oriented industries, a core component of the national economy.
The OECD has forecasted that, in 2022, Canada’s economy will expand by 3.8%. Compared to last year, that expansion is expected to be lower than the global average of 4.5%, but on par with the OECD average. Despite recovery signals, Canada continues to face lingering pre-pandemic structural issues related to inclusive growth, energy transition, and healthcare. Furthermore, the fallout from the Covid-19 crisis negatively affected Canada’s fiscal balance, with the federal government’s debt-to-GDP ratio rising from 31.2% in 2019–20 to 50.7% in 2022–23, requiring at least in the medium run a clear road map for managing debt to head off risks to fiscal sustainability and to reassure markets.
As part of the economic recovery and the need to address ongoing structural economic challenges in Canada, leading experts are highlighting measures that attract investment, particularly in export-oriented SME industries, promote the development of clean energy solutions, and provide more resources to the healthcare system would facilitate growth in the Canadian economy.
Broadening global collaboration can help attract investment and drive business growth
Before the pandemic, World Bank figures showed that Canada’s gross fixed capital formation (investment) rate declined from 3.5% in 2017 to 0.3% in 2019. Last year, the risks and uncertainties caused by the Covid-19 pandemic, coupled with volatility in the global energy markets, negatively impacted investment in the Canadian economy, leading to a drop in the investment rate to -3.7% in 2020 and below the United States at -1.5%, but at close parity with the OECD average of 3.9%. As the economy rebounds, Canada’s investment rate has started to recover and is expected to reach 0.3% in 2022; it is still projected to remain below the OECD average of 4.4% and the United States at 3.8%.
For Canada to take the lead in tomorrow’s global economy, new research from the C.D. Howe Institute highlighted that addressing investment challenges—that remain feeble compared to the United States and other countries—will be critical in driving competitiveness and productivity growth in the economy.
According to Michael Tremblay, President & CEO at Invest Ottawa, “given the significant contribution (50%) of small and medium-sized enterprises (SMEs) to Canada’s GDP, along with being export-oriented and a source of innovation within the economy, enabling these SMEs to access global markets where they can commercialise at large scale would help attract investment into the economy.”
However, despite their critical role within Canada’s economy, only 11.7% of SMEs export their goods and services because of ongoing challenges to identifying and pursuing new business opportunities in international markets.
To help break through the barriers facing SMEs in a dynamic and increasingly protectionist economy, Sonya Shorey, Invest Ottawa’s Vice President of Strategy, says, “Canada must foster increased collaboration with stakeholders on the ground in international markets. This is critical to help SMEs more easily access new partners, investors, customers and related commercial opportunities in an ever-changing global economy.” Shorey added, “SMEs would then be in a better position to build key relationships, deploy their products and showcase market adoption to attract investment, and generate new global revenues that help build the Canadian economy.”
Given the fundamental shifts expected from the Fourth Industrial Revolution, Canada must keep pace with technological change to successfully compete in a “winner-take-all” economy, requiring upskilling the workforce and developing solutions for tomorrow’s economy.
For these reasons, Tremblay pointed out, “Canada will need to leverage regional and sectorial expertise, particularly in life sciences, smart mobility, digital technology, clean energy and advanced manufacturing in building an ecosystem that brings together policymakers, commercial and post-secondary partners to improve collaboration and knowledge sharing within the economy.”
For instance, Tremblay noted that the Ottawa Hospital’s partnership with the Sheba Medical Center (Israel), Area X.O, and its CAV Talent Catalyst Program has brought in best practices to address healthcare challenges and improve innovation in smart mobility. By strengthening global and regional collaborations that help Canadian companies develop cutting-edge solutions, Tremblay said, “Canada will become an attractive place for investment that creates skilled jobs and growth in the economy.”
Capitalise on the clean energy sector’s potential amidst a shifting global landscape
In Clean Energy Canada and Navius Research’s latest report, the clean energy sector is projected to grow by almost 50% and employ 639,200 people under the federal government’s new climate plan by 2030. A significant portion of the growth in jobs is forecasted in clean transportation, with the number employed expected to reach 364,000, out of which 184,000 people are set to be in electric vehicle (EV) technology alone. As the trend to electrify the transportation sector grows globally, the International Energy Agency (IEA) and Bloomberg have both noted strong uptake in EV technology among Canada’s trade partners, namely the European Union and the United States. However, for Canada to take advantage of the opportunities that lie ahead, the clean energy sector will need to scale up quickly and integrate its solution within the economy, which remains a problem because companies cannot gauge their full environmental benefits and potential for financial returns until the technology is at a large enough commercial stage. The hurdles to scaling up for the clean energy sector also constrain their expansion into foreign markets because potential buyers look for existing commercial usage in Canada.
To help address these bottlenecks faced by the industry, Jane Kearns, VP, Growth Services at MaRS, said in an interview, “Canada needs to start by quickly resolving a few important areas, such as existing regulatory obstacles and skills shortages to enable the uptake and development of clean energy solutions within the country.” In addition, to improve commercial adoption, Kearns added, “the government procurement of Canadian cleantech solutions that are exercised within WTO rules would be extremely beneficial for the sector. It would help Canadian companies provide a customer reference point that can be used to showcase domestic uptake and, importantly, reduce investment risk to access capital from VCs and debt financing institutions, which is a crucial element required by companies to scale up, build competitive products, and create new jobs.”
Additionally, given the growing usage of EVs and the demand for lithium−ion batteries in the coming years, Kearns highlighted, “Canada’s economy would benefit from building a globally competitive EV industry that leverages an established history of automaking to manufacture EVs for local and international markets.”
Recently, as supply chain constraints have showcased the importance of strong commercial linkages, Kearns noted, “Canada’s proximity and trading relations with the United States and Europe position the EV industry well.” However, to drive the EV sector’s value in global markets, Kearns remarked, “Canada should look to sustainably extract large deposits of lithium in subsurface brine in Alberta that would not only create major opportunities for the region but also broaden the appeal for doing business with Canada as countries look to transition toward a low-carbon economy.”
Improve healthcare data gathering to guide public policy consensus
Based on a review by the Canadian Public Health Association (CPHA) of Canada’s initial response to the Covid-19 pandemic, key findings revealed that public health measures were constrained by the lack of surveillance and monitoring tools, which at the start of the pandemic led to difficulties in obtaining first-line data on the evolution of the situation and coordinating a pan-Canadian approach to public health policy.
Furthermore, CPHA’s review found challenges regarding the type of data being collected and, at times, did not identify the socio-economic characteristics of those being tested, notably economic status and ethnicity, which generated an incomplete picture of the outbreak and limited the capacity to target programs to meet the needs of those most affected or at risk and to identify health inequities.
Moreover, as new variants, such as Delta and Omicron, have emerged, the disproportionate socio-economic impact on poorer households has begun to resurface, highlighting C.D. Howe Institute’s cautionary note last year to improve healthcare data and information gathering to help authorities respond to emerging health crises more efficiently.
To address ongoing healthcare challenges and plan for future contingency measures, Prativa Baral, Epidemiologist and PhD Candidate at Johns Hopkins School of Public Health said in an interview that “Canada would benefit from more standardized and centralized data collection tools that accurately provide local, regional, and national governments with timely information to enable health experts evaluate potential outbreaks faster and reduce duplication of efforts across the country.”
By improving coordination among federal, provincial, and territorial governments to securely and safely gather the required information, Baral added, “healthcare resources can be allocated more efficiently and policy decisions streamlined. This will help decision-makers manage public needs more equitably in an evolving pandemic and bring consistency to the measures being adopted by various public health agencies.”
With the emergence of Omicron and previous variants, the evolving nature of the Covid-19 pandemic has highlighted the importance of having a strong health infrastructure equipped to manage not just the medical side but also other social determinants of health.
According to Baral, “It will be critical for Canada to adequately invest in all aspects of the public healthcare system to support the overall well-being of the population, and better prepare for the next health crisis.”
However, in recent years, Canada’s investment in the public healthcare system has lagged compared to most peer nations, contributing to resource constraints and difficult decisions being made during the Covid-19 pandemic that negatively impacted Canadians.
For these reasons, Baral noted, “overcoming these shortcomings needs to be addressed because only after having the appropriate mechanisms in place for safeguarding public health can the economy at-large benefit from a productive and healthy workforce.”
Given the ways digital technologies are being harnessed to support the public health response to Covid-19, Baral also highlighted that “one way to improve these shortcomings in the system would be to leverage technology in improving healthcare response and outcomes, which combined with public healthcare data, would allow new solutions to be developed and critically support innovation in the sector.”
Special thanks to Aleksandra Dysko, Epidemiologist for providing a background overview of infectious diseases and the initiatives taken during the initial Covid-19 outbreak in Canada.
Living With Covid Proving Tough for a Gridlocked World Economy – Bloomberg
China’s Birth Rate Not A Problem For Economy–Now – Forbes
China’s birth rate continues to fall. “Last year’s 10.62 million births, down from 12.02 million in 2020, barely outnumbered the 10.14 million death,” according to the Wall Street Journal. China’s rate of births per female is now down to 1.3, well below the replace rate of 2.1. The country’s low population growth, both now and in the future, has caused worry about China’s future economic growth. That worry is much overdone, though it’s clear that China’s fastest growth is past.
Any nation’s economy depends simply on total population multiplied by production per person. That arithmetic is right but hides some important insights. Many people are not productive. That’s not an insult, but a recognition that children and many elderly people produce little of economic value. The arithmetic offers more insight if restated: A nation’s economy depends on total working population multiplied by production per working person.
In the immediate future, babies are a drain on the economy, not a boost. Every parent knows this. Twenty years from now, today’s baby will be important to the economy, but that is of little value to forecasters looking out a few years into the future.
China’s economic boom started when Deng Xiaoping too over political control in late 1978. He instituted numerous reforms including tolerance of entrepreneurial activity. That tolerance started with small steps but eventually led to massive industrialization, especially in coastal cities.
China’s rapid growth period came not from population growth but from population migration. The movement of people from poor rural areas to China’s cities may be the largest migration in human history. This migration shifted people from low productivity farm work to higher productivity factory work, and it was enabled by the government’s tolerance of entrepreneurship.
The rural farmers of Chinas were not bad farmers, but they produced relatively little because they lacked tools and, in the earlier years of communism, worked communally. The higher productivity of the urban factory employees led to higher wages, as businesses competed with one another for the available workers.
In previous articles I argued that due to current politics, China’s Economic Miracle Is Ending. Even before that, though, I had seen that China Is Too Mature For Rapid Economic Growth because the easiest opportunities for expansion had been used. The two points of view are compatible. The first is not necessary, while the second is inevitable.
In the coming years, China’s economic growth could rebound. A rebound would require the government to substantially relinquish the control over the economy that they have increasingly exercised in recent years. Even then, the growth would not match the ten percent rate achieved in many of the past 40 years. That’s not a forecast but rather a description of a possibility that seems unlikely at this point in time.
A nation does not need a growing population to have a high and growing standard of living per person, though a larger population will certainly swell the gross size of the economy.
22 things you need to know about B.C. business and the economy in 2022 – BCBusiness
From inflation and supply chains to climate change and housing prices, we explore how things could unfold, with help from an expert panel
Well, that wasn’t always so fun. As they put 2021 behind them, with the COVID-19 pandemic still very much alive, business decision makers face another challenging year. What’s coming our way in 2022? To tease out some key themes for B.C. organizations of all sizes, we assembled a panel of seven experts.
Of course, it wouldn’t be a business and economic outlook without a big disclaimer. Several of the interviews with our panel took place before the floods that brought so much destruction, as well as the arrival of the Omicron variant. Here’s hoping for a better 2022.
Our panel of experts
(Left to right): Ryan Berlin, John Davis, Fiona Famulak, Alex Hemingway, Ken Peacock, Bryan Yu, David Williams
Ryan Berlin, senior economist and director of intelligence, Rennie Intelligence
John Davis, senior vice-president and regional manager, commercial banking, B.C. region, Wells Fargo
Fiona Famulak, president and CEO, BC Chamber of Commerce
Alex Hemingway, senior economist and public finance policy analyst, Canadian Centre for Policy Alternatives
Ken Peacock, chief economist and senior vice-president, Business Council of British Columbia
David Williams, vice-president of policy, Business Council of British Columbia
Bryan Yu, chief economist, Central 1 Credit Union
22 things you need to know about B.C. business and the economy in 2022
1. The big picture is mixed
Several forces are converging to deny B.C. and the rest of the world a smooth COVID recovery. “The economy is improving because the pandemic is ebbing and the economy is reopening,” says David Williams of the Business Council of B.C. “But we are running into some headwinds and difficulties with supply chains and global supply.” So the outlook for global and Canadian economic growth has been downgraded for 2022, with some of that expansion pushed back to 2023. “At the same time, inflation has ended up being far higher, broader and more sustained than many central banks had projected.”
2. An economic rebound hides fundamental flaws
As of December, the BCBC forecast the province’s real GDP growth at 5 percent for 2021 and 4 percent this year, versus 4.3 percent for Canada as a whole. Still, the economic fundamentals are much softer than those relatively strong numbers suggest, Ken Peacock stresses. “If you look across different industry sectors, for nine of the 16 broad industry categories, employment levels are still below pre-pandemic levels,” he says of B.C. “So more than half the industries have not seen jobs recover to where they were, and we’re almost two years out now.”
3. Inflation looks like it’s here to stay
Anyone convinced that the current wave of inflation is a passing phase could be disappointed. After the Bank of Canada upgraded its year-average inflation forecast by a full percentage point, Williams says, the Consumer Price Index (CPI) rose 4.7 percent year-over-year in October. “So these are very difficult times for Team Transitory.”
With inflation not expected to return to 2-percent levels until 2024, Peacock holds out hope that higher prices will ease somewhat. “But if we see 5-, 5.5-, 6-percent inflation stick around for two or three or four years, purchasing power is going to be severely eroded,” he says. “Households will fall behind. And this, I think, is a potential problem for this provincial government, which, from the day it was elected, has been very interested in raising well-being and prosperity for households, personal incomes.”
Sources: Statistics Canada, BC Stats, Business Council of B.C.
4. Interest rates have nowhere to go but up
Uncomfortably high inflation means that businesses should plan for rising interest rates, says Central 1’s Bryan Yu. He thinks the market’s call for three rate increases this year and two in 2023 is aggressive, though, given that the economy isn’t fully healed. “It’s heading in the right direction, but whether that warrants three hikes is debatable.”
In real terms after inflation, Williams notes, Canada’s policy interest rate is –4.5 percent. “Interest rates affect the economy with a lag of about two quarters to six quarters,” he says. “So you’ve got to ask whether a real policy rate of –4.5 percent is what the economy really needs in six to 18 months. It doesn’t look like it needs that kind of stimulus.”
With real interest rates at an all-time low, the Bank of Canada has promised not to change the policy rate until the second half of 2022. “With inflation now at 4.7 percent, it’s very difficult to believe that the central bank will leave interest rates on hold for that period of time,” says Williams, who points out that the BoC recently hinted at a second- or third-quarter hike. “But that still seems an awfully long time to leave interest rates, in real terms, being very significantly negative.” If real rates quickly move closer to zero, “that would be a very contractionary effect on the economy, and I don’t think the economy is all that strong and robust.”
5. Fintech could help save small business
The pandemic hasn’t been kind to smaller companies in need of financing. “Access to capital when you’re Jimmy Pattison is very different than if you’re some small business,” says Wells Fargo’s John Davis, whose firm typically provides loans and other services to companies with annual revenue north of $350 million. “And small businesses fell through the cracks a little bit here because they don’t have the access to capital that big companies have.”
As interest rates rise and labour constraints continue, those smaller outfits will face challenges in 2022, he predicts. Because the big Canadian banks have always had trouble figuring out that space, credit unions and other smaller financial institutions have tried to fill the gap, he says. But they want to move upmarket, too, because such loans don’t yield much of a return. “I’m wondering if some of the fintechs or non-bank solutions might be the ultimate credit providers and service providers to smaller businesses.”
6. Labour supply pains will continue, with a twist
“Without a doubt, the severe skilled labour shortage B.C. is experiencing is our biggest challenge in the next year,” the BC Chamber’s Fiona Famulak says. “There are jobs out there but not enough people to fill them. This is already impacting businesses and communities both large and small. In addition, the increasing cost of doing business and supply chain challenges are adding to the issues that small and medium-sized businesses are trying to manage.”
On the labour front, Davis has watched forest products companies hold job fairs to find mill workers. “One of our biggest clients is a hotel operator,” he says. “Getting people to do that kind of work is incredibly hard.” Davis attributes some of the shortage to the Canada Emergency Response Benefit (CERB), which made it relatively easy for workers with low-paying jobs to stay home. “It’s not just new people,” he says of the labour shortage. “It’s the people that have left and trying to get them to come back.”
At the same time, there’s still plenty of slack in the labour market, says Ryan Berlin of Rennie Intelligence. Before COVID, Metro Vancouver was home to 70,000 people looking for work—a number that has since grown to 100,000. “So there’s an excess of 30,000 people above what we had seen pre-pandemic who are wanting to work but can’t.”
Given that surplus, you’d think employers would have their pick, Berlin says. But even with Canada’s job vacancy rate at a record high, “they’re struggling to connect the skills and people out there to the needs that they have.”
7. Employment levels aren’t what they’re cracked up to be
Climbing out of what Peacock describes as a big hole, B.C. saw a 7-percent increase in jobs from January through October 2021, putting it ahead of the rest of the country. But distorting that picture is public sector employment growth, which spiked by about 16 percent, he notes.
And remember, employment throughout the province fell significantly in 2019, Peacock says. “So we went into the pandemic at a lower level of employment, which has made it much easier for B.C. to regain that pre-pandemic level of February 2020 that everybody’s been focused on.”
Peacock sees reason for concern about relatively muted hiring conditions in the private sector. “When I look at some of the additional costs that are being heaped on employers, going back to the employer health tax and then all these costs associated with managing the pandemic, some difficulties and challenges in hiring people and then sick-pay costs added on, one does wonder to what degree we’ll see stronger private sector hiring activity over the next couple of years.”
8. Expect supply chain woes to stretch on…and on
For B.C. businesses in a wide range of industries, global supply chain disruptions keep making it tough to serve their customers. “The view that they’ll soon sort themselves out seems a fairly optimistic assumption at this point,” Williams says of those troubles. “They look like they’re going to be around for quite some time.”
Just ask one of Wells Fargo’s biggest manufacturing clients, which recently announced that because it can’t get all the parts to fill its orders, it needs at least 18 months’ relief from the banks. “This is the market leader in North America for what they do, and they’re worried about that,” Davis says. Besides absorbing the cost of borrowing capital, the publicly traded company could see its market capitalization shrink, which makes it harder to borrow, he explains. Also, frustrated customers might look elsewhere—and a rival could step into the void. “That’s terrifying.”
9. Business investment is flagging—but there’s hope
As the saying goes, you have to spend money to make money. But in Canada, business investment per worker has been falling for several years, according to recent research by the Toronto-based C.D. Howe Institute. “So we are becoming less industrialized—we have less capital equipment, less technology, less innovation, less research and development per worker than we did the previous year or five years ago,” Williams says.
Lately, with help from deep-pocketed foreign investors, several B.C. businesses have reached unicorn status. “But what matters for the country and what matters for real incomes across the country is what’s happening at the average firm,” Williams says. “At the average firm, there’s less investment per worker going on over time, and the capital stock is actually shrinking on a per-worker basis.”
Yu expects the tide to turn in B.C. “As businesses get more certainty in the market—they understand where the demand is, things are reopening and they’re not going to close—they are going to move back into reinvesting in their operations,” he says. Yu also thinks that given labour shortages, some companies will look at software and equipment to boost productivity. “Possibly they’ll have less of a need for as many employees.”
10. Either way, climate change will cost us
If there was ever any doubt, last year’s raging forest fires and catastrophic floods made it clear that climate change is a major threat to B.C. But not everyone is happy about our policy responses to this existential crisis. For his part, Peacock sees the provincial carbon tax adding to already soaring energy costs. “At the end of the day, the carbon tax in B.C. is going to hit consumers’ pockets, and it’s going to hit businesses as well.”
Companies with a domestic customer base can pass on those extra costs, Peacock adds. For exporters, though, there’s no such option. “Most of our big exporters, the ones that really matter, are not in a position to adjust their prices,” Peacock says.
Among jurisdictions with a price on carbon, B.C. is one of the few without a cap-and-trade system or other mechanisms to shield exporters, he explains. “Over time, what this means is a less productive export sector, and companies are going to be less willing to deploy capital and make investments in B.C., unless the policy framework is realigned,” Peacock says. “I think that weighs on the export sector over the next three, five, seven years here in B.C.”
For the CCPA’s Alex Hemingway, high oil prices are yet another reason to move to renewables. “One of the issues that’s happening in terms of the lagging climate progress is the power of the fossil fuel industry,” he says, also citing lobbying efforts against employer-paid sick says and a wealth tax. “It gets at the power of these lobby groups to shape the policy agenda and throw some dirt in the gears when there’s a fear that it’s going to affect their interests.”
11. Like the rest of the world, we’ll keep an eye on China
To put economic pressure on other countries, an increasingly assertive China doesn’t hesitate to slow or halt imports, whether that’s Canadian canola or Australian coal. How vulnerable is B.C., given frostier-than-ever relations between Ottawa and Beijing?
In Wells Fargo’s local client base, the biggest single industry is forest products, which Davis calls the best example of a B.C. sector tied to China. “We’ve yet to hear—I’m touching wood as I say this—any concerns with that,” he says. “Are they going to be looking for that lumber supply from Russia? Are they going to be looking for it from Scandinavia? Maybe it’s too early for us to really see it, but I haven’t seen any fallout from that yet.”
Sources: Statistics Canada and BC Stats; Business Council of B.C. forecasts
12. As government supports wind down, businesses must find ways to add value
“Overall, pretty good,” the BC Chamber’s Famulak says when asked how we’re doing with government supports for businesses still navigating the pandemic. “But let me be clear: the federal and provincial governments need to look at ways they can continue supporting businesses that include easing tax burdens and slowing down the layering-on of costs as we have seen over the last few years. We need to deal with our skilled labour shortage, and governments need to explore all channels available to them, from enhancing immigration policy to essential skills training.”
Peacock suspects that many companies have been sustaining themselves on government programs. “When they’re wound down, we probably are going to see more businesses fail,” he says. “If these were struggling businesses, maybe shifting to another industry or sector or line of work will in the long term, in the medium term, be an improvement. But there’s pain associated with this turnover process.”
Williams suggests that businesses think about how to add value. “If they’re able to offer higher-value-added goods and services for their customers, they should do pretty well,” he says. “But the businesses that are in low-value-added sectors where they’re dependent on a low cost of labour and easy access to pools of low-cost labour, clearly that’s going to be more difficult.”
13. Land-based industries keep taking a hit
Peacock makes a distinction between the province’s tech sector, which is concentrated in Metro Vancouver and parts of Vancouver Island and the Interior, and land-based industries such as forestry and mining. For those businesses, the regulatory climate, Indigenous issues and the carbon tax make life complicated, he says.
Peacock singles out the provincial government’s recent announcement that it plans to defer logging on as much as 2.6 million hectares of old-growth forest. That policy decision could prompt the closing of 10 to 14 sawmills, plus a couple of pulp mills, he says. “This is going to lead to the shuttering and loss of high-value-added jobs.”
14. Indigenous economic reconciliation faces roadblocks
With the province and many businesses committed to economic reconciliation with Indigenous Peoples, what can we expect in 2022? “It’s mixed, because I think the reconciliation and economic development and First Nations’ involvement in economic projects is clearly a positive,” Peacock says. “And I think businesses have for many years been keen, as long as they know the rules and the relationship and who owns the land, to get on with doing business.”
But events like the blockade of the Coastal GasLink pipeline by a Wet’suwet’en Nation clan pose challenges, Peacock maintains. “I think it’s prompting companies to take a closer look at deploying hundreds of millions of dollars or half a billion dollars in the province and wondering what that investment return might be over a decade or two, given some of the complexities related to the land base.”
Source: Central 1 Credit Union
15. Dwindling choices spell more housing crisis
One of the biggest pandemic stories is the red-hot provincial housing market. With help from low interest rates, B.C. home sales remain well above pre-pandemic levels, Yu says. But for 2022, Central 1 forecasts a 21-percent drop.
Don’t expect prices to follow suit, though. “The pricing conditions are going to remain very strong because there’s no supply,” Yu says. “There’s not a lot of choice or options for a lot of buyers right now, so they’re kind of rushing toward the market.”
To tackle its shelter shortage, B.C. needs to massively increase not just public and not-for-profit housing but also the overall supply, the CCPA’s Hemingway contends. “Every time we make a gain in another area—if people’s wages rise a little or if their costs go down for child-care investment—it can still quickly get eaten up by increased rents.”
16. The COVID immigration boom could turn out to be a blessing
Rennie Intelligence’s Berlin was one of many observers left puzzled by the federal government’s pandemic immigration moves. At first, he was shocked to see Canada boost its target in the midst of COVID, given that it would inevitably result in a surplus of workers. The feds, who have set a quota of 1.2 million immigrants for 2021-23, welcomed some 220,000 during the first eight months of last year. So the year-end total could be an all-time high of 370,000.
For B.C., which gets about 14 percent of national immigration, that’s good news, Berlin maintains. Besides potential labour, he says, immigrants bring diverse cultures and perspectives. “So I think that bodes well for setting us up as we turn the corner and put COVID in our rear-view mirror.”
B.C. also stands to benefit from robust interprovincial migration, Berlin says. From April 2020 through last June, we attracted a net 43,000 new residents from other parts of the country while most other provinces lost people. “If you look at it from, again, a labour supply perspective, to me, that’s a good thing.”
With that population growth comes demand for new housing, Berlin adds. “Over the next six months, we’re not out of this, but I think there’s some tailwinds for our part of the world in particular that will put us in a pretty good position to begin to actually grow in the next year.”
17. For some, taxes remain a steep price to pay
Peacock doesn’t mince words about provincial taxes on people and businesses. “Top marginal tax rates are at a high for individuals,” he says. “Effective marginal tax rates on investment in B.C. are among the highest, if not the highest, in Canada. So it’s starting to shape up like the investment climate is pretty good for some industries, but it’s pretty bad for land-based operators and maybe some manufacturers here in B.C.”
18. Taxing the rich calls for getting creative
In Hemingway’s view, this is a good time to do something about growing economic disparity: “The public appetite for action in terms of reducing inequality, including taxing the rich, seems to be higher than at any point I can remember.” He cites a recent national survey by Ottawa-based Abacus Data in which 89 percent of respondents backed a 1-percent tax on the wealthiest Canadians to support pandemic recovery.
At the provincial level, Hemingway sees a big opportunity to redistribute wealth by taxing property, whose value in B.C. has climbed by more than $1 trillion since the mid-2000s. Today, property tax applies to individual parcels of land. “But now that we have the beneficial ownership registry online, what you could do is apply the tax to the total holdings of any specific landowner above a given value,” Hemingway says, suggesting that the provincial government use different brackets.
19. Cities and the climate need more public transit
Post-pandemic and in an era of rising inequality and climate change, there’s a growing recognition the government must play a bigger role in several areas, Hemingway says. For example, B.C. needs to “massively and much more quickly invest in public transportation,” he argues. “We’ve been moving at a pace of maybe building about one SkyTrain line a decade in Metro Vancouver. If we’re serious about this climate thing and we’re also serious about city-building, we need to be looking at ramping that up considerably.”
20. Watch for a retail reconfiguration
At Central 1, Yu expects a B.C. retail slowdown this year, for two reasons. “No. 1, the sales numbers are being boosted by higher prices,” he says. The second factor: as the economy fully reopens, much of the demand related to housing should rotate back into services. “So we’ll see that in the GDP, but the retail numbers will suffer.”
During COVID, the property class that Wells Fargo has been most worried about is retail, Davis says. It remains a concern as shoppers keep moving online. Davis flags what he calls the barbell effect: big-box stores like Costco and Walmart are doing well, along with luxury retailers. “But if you’re in the middle category—if you’re the Gap or Old Navy or whatever it is—you’re getting slaughtered.”
However, experiences still matter, Davis says. Take Vancouver’s Robson Street, which now has less typical retail and more Asian-style service businesses such as tea shops and dessert spots. “I think you’re going to see a reconfiguration of retail in a big way.”
21. Natural resources have a big role to play in the recovery
Tech may grab all the headlines, but Williams contends that other sectors are better equipped to deliver us from the pandemic. “You really need your big economic engines to pull you out of this, and our big economic engines are the natural resources industries,” he says. “For every hour worked in the natural resources sector across Canada, we get $330 of value added.” In unconventional oil and gas, that number is $1,300—23 times the national average of $56.
Given their broader economic benefits, it doesn’t make sense to replace such industries with those that generate only $30 to $90 per hour worked, Williams says. “So it’s a really delicate balance, I think, for policy makers to address our carbon challenges but at the same time recognize Canada’s comparative advantages on international trade.”
22. As the economy rebounds, slow and steady might win the race
“We’re entering into a very delicate time in the economic recovery,” Williams says. “And so I think it’s important for the federal government, for central banks, also for the provincial government, to avoid any more policy mistakes,” he argues. “Change the game.” Although some government interventions in the economy were necessary, they might not be appropriate now, he adds. “And so we need to be a bit more nimble, I think.”
Still, Peacock believes B.C. will enjoy solid growth this year, noting that the pandemic recession was especially unusual in one way. In a typical downturn, spending on goods such as cars and appliances drop off while services remain fairly stable. But during 2020, services fell 7 percent while sales of goods grew.
“I don’t think that’s been regained or even half regained in 2021 because of the ongoing closures,” Peacock says. “So that lift does stretch out into 2022, along with the getting back of some international tourism. I don’t think it’s going to be a huge surge but rather a slow, steady grind. And that’s going to help provide a boost.”
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