Transcript British Columbia Economy - Mortgage Investment Association of BC

1
The World Economy and BC
presented to
Mortgage Investment Association of BC
June 21, 2011
by
Bernie Magnan
Assistant Managing Director and Chief Economist
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Background
• Factors considered in Economic Forecast
– Previously looked at United States and
Canadian Economies
– Some attention paid to Japan and Europe
– Now need to consider other major world
economies – especially European Union,
BRIC countries (Brazil, Russia, India and
China)
– Canadian Domestic Factors
– Provincial Factors
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Background (cont.)
• United States Still Biggest Economy - >
$14 Trillion GDP
• Japan, Germany, South Korea, other
Euro nations still impact world economy
• Increased interconnectivity of World
Economies
• Sovereign Debt
• Consumer Confidence
• Residential and Commercial construction
• Commodity Prices
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Background (cont.)
• Major Recession Factors
– Unregulated Lending in US Market – Especially
Housing (Sub Prime, 100% Loans, ‘NINJA’ Loans,
Extended Credit)
– Creation of Little Understood Structured Financial
Products
– Lack of Financial Regulation
– Overbuilt US residential housing mkt (on spec)
– Sovereign debt/social support (especially in EU)
– US Budget and Current Account Deficits
– Repackaging of High-Risk Products
– Hedge and Derivative Calls
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Real GDP
(Projected Average Percentage Change)
12.0%
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
-2.0%
-4.0%
-6.0%
-8.0%
2009
US
China
Canada
India
2010
2011 pro 2012 Fcst
Mexico
Euro Area
Source – Economic and Financial indicators – The Economist
Japan
Britain
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Commodity Prices (2008/2009)
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Commodity Prices (2010-11)
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Canadian Economy
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Canadian Economy
Positive Factors
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•
•
•
•
11 Years of Budget Surpluses
Budget Debt down by $90 Billion (to $458 Billion)
Debt-to-GDP Lowest Among G7 Countries
Strong Financial System
Stable Housing Market
Positive Immigration
Stimulus Spending ($60 Billion Over 2.5 Years)
G7 COMPARATIVE NET DEBT-TO-GDP RATIOS
CANADA’S TURNAROUND - 2ND WORST TO BEST
1995
2008
Net Debt-to-GDP Ratio
170%
160%
150%
140%
130%
120%
110%
100%
90%
80%
70%
60%
50%
40%
30%
20%
Canada
U.S.
Source: Department of Finance
U.K.
France
Germany
Japan
Italy
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10
G7 COMPARATIVE NET DEBT-TO-GDP RATIOS
CANADA’S TURNAROUND (cont.)
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Canadian Economy
(cont.)
Negative Factors
• Aging Demographic
• Labour and Skills Shortages
• Lack of Investment in Productivity and
Innovation
• Canadian Dollar at Par With US $
• $101 Billion Deficit Increase Over Two Years
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Canadian Economic Issues
• Impact of World Financial Liquidity
• Border Access
– Movement of Business Professionals
– New Border Transportation Charges – Truck
and Rail
– Increased Security Requirements
• Balance of Payments
• Impact of US Economic Recovery
• Commodity Pricing
• Federal Budget
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British Columbia Economy
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Taxpayer Supported Debt
as Per Cent of GDP and Per Capita
Per Cent GDP
22%
21%
20%
19%
18%
17%
16%
15%
14%
13%
12%
20.6
19.1
21.3
20.6
17.5 17.8
16.2
18.2
13.3
16.1
14.4 14.0
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British Columbia Economy
Positive Factors
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Low Cost of Electrical Energy
2010 Olympics
Skilled Workforce
Gateway to Pacific Rim
Population In-migration
Natural Gas Play
Commodity Prices
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British Columbia Economy (cont.)
Industry Outlooks
• Forestry
• Mining
• Energy
• Transportation and Warehousing
• Finance and Real Estate
• Health Care
• Tourism
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British Columbia Economy (cont.)
Statistics
• Population Growth – 1.6%
• Employment – Flat to Small Growth
• Canadian Dollar Volatility - Par
• Gas prices - Volatile
• Lumber Prices - Variable
• Inflation – 2.7%
• Unemployment - 7.6%
• Bank Rate – 1.0% (end of year)
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Forecast
• Canada
• British Columbia
+ 2.9%
+ 2.4%
Vancouver Region Impacts
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‘Downtown’ British Columbia
Commodity Prices and World Demand
In-migration
Regional Growth Strategy
– Land Availability
– Demand/Densification
– Industrial/Commercial Land Requirements
– Transportation
Questions ???