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Province of British Columbia
NEWS RELEASE
For Immediate Release
2020FIN0051-001698
Sept. 10, 2020
Ministry of Finance
Economic challenges of COVID-19 matched by strong supports for people

VICTORIA – The COVID-19 pandemic’s impact on provincial revenues and unprecedented government spending on supports for people and businesses has led to an updated provincial deficit forecast of $12.8 billion for the 2020-21 fiscal year.

The deficit is on track with the Province’s July fiscal and economic scenario.

“The pandemic has threatened lives and livelihoods, and our government responded with one of the most supportive, comprehensive action plans in the country,” said Carole James, Minister of Finance. “Since the Province’s July fiscal and economic scenario, we have seen stronger than expected consumer spending, housing activity and employment gains. These gains are offset by increased prudence to help B.C. weather the long road ahead.”

The Province’s first quarterly report confirms revenue declines in taxation, natural resources and other sources that were anticipated in July. However, the overall impacts on revenues and expenses are lower, with a $5.7-billion decline from Budget 2020, compared to a $6.3-billion decline shown in the July scenario. Improvements from July’s update include better than expected employment gains, retail sales and housing activity, resulting in revenue gains in provincial sales tax, personal income tax and property transfer tax.

The updated deficit forecast includes a $1-billion forecast allowance as part of government’s commitment to economic prudence in response to the heightened uncertainty brought by COVID-19.

The first quarterly report also includes a summary of COVID-19 investments to date, with details of the $7.6 billion in COVID-19 response measures that have supported people and businesses since the beginning of the fiscal year.

The COVID-19 Action Plan has included supports such as workers benefits, rent supplements, income and disability assistance supports, and economic recovery funding. Another $1.8 billion in temporary relief measures for people and businesses include supports such as the Climate Action Tax Credit, pandemic pay for front-line workers and the reduction of school tax for commercial properties.

As part of the COVID-19 Action Plan, $1.5 billion has been earmarked for economic recovery measures to be announced in September.

Learn More:

To read B.C.’s First Quarterly Report, visit: www2.gov.bc.ca/gov/content/governments/finances/reports/quarterly-reports

For information about BC’s Restart Plan, visit: http://gov.bc.ca/restartbc

To learn more about the supports and services available for people, businesses and communities through the pandemic, visit: gov.bc.ca/covid19

For the latest medical updates, including case counts, prevention, risks and testing, visit: http://covid-19.bccdc.ca/
Or follow the BCCDC on Twitter: @CDCofBC

For the provincial health officer’s orders, notices and guidance, visit: gov.bc.ca/phoguidance

For non-health related information, including travel, transportation and essential service information, call (toll-free) 1 888 COVID19 (1 888 268-4319) between 7:30 a.m. and 8 p.m. (Pacific time), seven days a week, or visit: gov.bc.ca/Covid19

A backgrounder follows.

 
Contact:
 
Ministry of Finance
Media Relations
250 213-7724
 

 
Province of British Columbia
BACKGROUNDER
For Immediate Release
2020FIN0051-001698
Sept. 10, 2020
Ministry of Finance
B.C. First Quarterly Report 2020-2021

The First Quarterly Report for the 2020-21 fiscal year shows the economic impacts of COVID-19 in B.C.

The province is forecasted to end the fiscal year with a deficit of $12.8 billion, because of unprecedented COVID-19 response measures and lower revenues.

Signs of economic recovery through improvements in employment, retail sales and housing activity support the projection of a partial economic recovery in 2021.

Economic highlights

  • B.C. real gross domestic product (GDP) is forecast to decline by 6.7% in 2020, before increasing by 3.0% in 2021.
  • After experiencing substantial job losses in March and April, the B.C. labour market has shown signs of improvement.
  • From May to August, B.C. regained roughly 62% of the total number of jobs lost since February. There were still 149,600 fewer jobs in August compared to February. B.C.’s unemployment rate for August is 10.7%, up from 5.0% in February.
  • Retail sales saw its largest monthly decline on record in April. However, retail sales rebounded as restrictions began to ease in May.
  • Retail sales were 0.2% lower in June compared to February 2020.
  • Housing market activity has been resilient despite the pandemic. July home sales were 25.5% higher than February.
  • An average of six private sector forecasters expect B.C. real GDP to decline by 5.4% in 2020 and grow by 5.2% in 2021. This is better than the expected decline of 6.4% on average across Canada for 2020 and similar to the 5.2% growth expected nationally for 2021.

Operating results

  • Compared to Budget 2020, revenue forecasts are $4.6 billion lower and expenses are $7.7 billion higher.
  • In comparison to the July economic and fiscal scenario, the impacts of the pandemic on revenues and expenses is $5.7 billion – a $600-million improvement from the July scenario.
  • The net cost of the government measures is $6.5 billion, including federal funding, which is $300 million higher than projected in July.
  • Budget 2020 forecasted an operating surplus of $227 million and the first quarterly report projects a provincial operating deficit of $12.8 billion, including a $700-million increase to the forecast allowance.
  • Revenue for 2020 is forecast to be $56 billion and expenses are forecast to be $67.8 billion, with an increase in the forecast allowance to $1 billion.
  • Government’s support for people and businesses in response to COVID-19 is estimated at $7.6 billion. This includes:
    • $5.81 billion in Supplementary Estimates spending for the COVID-19 Action Plan.
    • $1.8 billion for additional COVID-19 measures, including the one-time increase to Climate Action Tax Credit and Temporary Pandemic Pay and other revenue and relief measures.

Capital spending

  • Budget 2020 included $22.9 billion in taxpayer-supported capital spending over the fiscal plan. It included new investments to sustain and expand provincial infrastructure, including schools, post-secondary facilities, housing, transit, roads, bridges and hospitals.
  • Capital projects are proceeding and the construction industry is ready to deliver the Province’s historic capital plan.

Debt levels

  • Governments, like the private sector, borrow to finance the building of long-lasting capital infrastructure, such as schools, hospitals and highways. In recent years, B.C. has had among the best debt metrics and credit rating compared to other Canadian provinces.
  • Taxpayer-supported debt levels are projected to reach $59.8 billion by the end of the fiscal year – $10.6 billion higher than forecasted in Budget 2020.
  • The taxpayer-supported debt-to-GDP ratio is forecasted to reach 20.8% in 2020-21, up from the Budget 2020 forecast of 15.5%.
  • Despite the need for increased borrowing and higher debt levels, B.C. will benefit from low interest rates partially due to the Province’s triple-A credit rating.
  • As a result, the Province’s debt remains affordable.
 
Contact:
 
Ministry of Finance
Media Relations
250 213-7724
 

 
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