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B.C. economic growth to ‘slow more sharply’ than rest of Canada in 2023: TD

Housing market’s sensitivity to rate hikes will weigh on growth, say economists
B.C.'s unemployment is expected to tick upward in 2023, according to forecasters at TD Bank

The B.C economy has spent the past eight years outperforming its fellow provinces and is set to close out 2022 with growth of 3.1 per cent.

“This impressive feat looks to have run its course this year,” TD Bank economists said in a forecast Monday.

“Next year is shaping up to be a much different story, with B.C.’s expansion rate expected to slow more sharply than Canada as a whole.”

Economists predict economic expansion will slow from 3.1 per cent this year to 0.5 per cent in 2023. Growth is expected to contract even further in 2024, coming in at 0.3 per cent.

“Our view for a more outsized slowdown in the province is centered on the fact that households in B.C. are the most highly indebted in the country,” the forecast stated.

“The Bank of Canada’s rate hiking campaign is thus likely to take a larger toll on household spending.”

The fact that B.C.’s housing market has proven itself “sensitive” to higher rates will also weigh on the province’s gross domestic product as home sales are expected to drop 22.8 per cent next year, according to the bank economists.

“In the non-residential sector, investment spending should continue being boosted by the LNG Canada project throughout the forecast horizon, although other large-scale projects, like the Trans Mountain pipeline expansion and the Site C dam project, will be winding down,” the forecast stated.

Unemployment is also expected to rise from 4.7 per cent to 5.1 per cent year over year, which the bank economists said would help reduce the size of the imbalance of B.C.’s “ultra-tight” jobs market.

The province will be going into the new year with a sizeable budget surplus, estimated to be $5.7 billion.

Newly minted Premier David Eby began announcing surplus spending measures last month, promising British Columbians a one-time cost of living credit for BC Hydro customers totalling $320 million. He also announced $500 million would be going to a new B.C. Affordability Credit.

The province’s Economic Forecast Council also sees growth slowing significantly next year, from 2.9 per cent in 2022 to 0.4 per cent in 2023.

Meanwhile, BMO senior economist Robert Kavcic said in a note last week the downturn in B.C.'s real estate sector will be the "sharpest in the country."

“Slower new construction and renovation activity don’t look far behind,” he said Dec. 16.

BMO’s own forecast sees the economy contracting 0.3 per cent in 2023 before expanding the following year by 1.6 per cent.