Central 1 predicts bumps in B.C.’s road to recovery

VANCOUVER — Economic experts with digital banking services provider Central 1 predict B.C. is on the path to economic recovery, but it won’t be without some bumps.

According to Central 1, B.C.’s economic recovery is being led by private sector growth and a robust real estate market but is dependent on the pandemic trajectory and the global economic landscape.

Brian Yu, Central 1’s chief economist, explained while the province remains on track for a full economic recovery, the path still has some bumps and the pace of growth will be dependent on the evolution of the pandemic and a resolution of supply chain disruptions.

Yu’s latest analysis shows an economic growth rate of 5.3 per cent is predicted in B.C. this year, followed by the province’s growth decelerating to 4.2 per cent in 2022 and 2.6 per cent in 2023 as economies return to a longer-term output trend. This growth modestly exceeds Canadian GDP growth of 5.0 per cent this year and 4.1 per cent and 3.0 per cent in 2022 and 2023.

While inflation and new COVID variants could trigger rapid interest rate hikes, Yu says high energy prices are beneficial to Canada for nominal GDP and act as a buffer against import inflation.

“Interest rates are expected to remain accommodative despite a recent increase in five and 10-year yields catalyzed by high inflation and expectations of earlier hikes to the U.S. policy rate,” said Yu. “The Bank of Canada’s overnight rate is forecast to remain at current levels until a 25-basis point hike well into the second half of 2022, and to climb 75 basis points in 2023.”

Yu believes B.C. will continue to outpace the national performance through 2022 with the private sector leading growth. He noted B.C.’s economy will be buoyed by robust government spending on capital projects such as ongoing Millennium Line UBC Extension.