The pandemic lockdown severely restricted a growing economy in 2020, but that’s all set to change this year as the majority of Canadians begin to access COVID-19 vaccines.
According to a recent media release from the Province of B.C., the Economic Forecast Council is predicting “a slight rebound and moderate growth in the economy in 2021 with further growth in 2022.”
Estimates say B.C.’s real gross domestic product (GDP) declined by 5.1% in 2020, while growth of 4.7% is predicted for 2021 and 4.3% in 2022.
Meanwhile, the Ministry of Finance’s Fall 2020 Economic and Fiscal Update, released Dec. 17, 2020, showed prudent real GDP projections of a 6.2% decline in 2020, followed by a 3.0% gain in 2021, while B.C.’s Fall 2020 Economic and Fiscal Update forecast the provincial deficit at $13.6 billion for 2020-21.
Before the pandemic British Columbia led all provinces by having the lowest unemployment rate for two years — one of the longest periods in more than a decade. B.C. has retained its position, with strongest employment growth year-to-date to November, while also being the only province in Canada with a triple-A credit rating from the three major international rating agencies.
As such, it is now expected to outperform the rest of Canada with steady growth on the forecast horizon.
“The end is near”
South Island Prosperity Partnership CEO Emilie de Rosenroll says this is encouraging news for Greater Victoria, but cautions “a slight rebound is going to be unequally distributed throughout the economy – with some sectors and households at risk of being left behind. Also worth noting is that the exact timing of recovery is still uncertain.”
But, she adds “so long as vaccine roll outs proceed as planned, new mutations aren’t resistant to the vaccines, and stimulus continues to flow this year, the end is near. This is exciting on its own and we’re also likely to see some added relief as social restrictions ease, caused by pent up consumer demand and productivity boosts.”
South Island Prosperity Partnership has been actively involved in facilitating economic growth and business recovery over the last year, convening hundreds of private and public stakeholders for discussions around effective strategies. Those discussions resulted in the Reboot Plan, a blueprint for innovation, growth and support as the economy moves into a post-pandemic world.
Greater Victoria well positioned for recovery, some sectors left behind
Alongside its regional cohorts, the Victoria Chamber of Commerce has been shepherding its members, and advocating for businesses across the region, throughout the turbulence of the pandemic, which saw some businesses thrive, many businesses struggle to stay alive, and others forced to close.
Chamber CEO Bruce Williams says they’ve noticed promising signs of recovery as “employment numbers have rebounded, the construction and renovation sectors are in high gear, and even hospitality operators have shown some amazing innovation in the face of the restrictions imposed upon them.”
He notes the region’s economy “has the stability of a large cohort of government employees, the thousands of jobs at CFB Esquimalt comprised of both enlisted and civilian workers, the tech sector is mostly thriving, real estate is wildly buoyant and essential retail services are functioning to capacity.”
And while there is plenty of good news on the horizon, the pandemic’s impact on tourism-related operators has been “devastating to that sector,” says Williams, adding “any comeback is mostly reliant upon the reopening of the border with the U.S ., which won’t be possible without widespread vaccination and rapid COVID testing in place.”
Households eager to spend and travel in 2021
Further strengthening reports of an increasingly buoyant economy post-pandemic comes from CIBC Economics Research. They say that as of November 2020, “the level of cash in personal deposit accounts in the banking system was close to $120 billion above the level seen before the crisis, and was up by 20% on a year-over-year basis.” They assume a conservative 20% of it “could be funneled into spending on services that re-open in the second half of the year, propelling the economic recovery and negating the need for additional fiscal stimulus.”
With almost 40% of Canadians reducing spending during the pandemic, roughly 30% of households have seen savings rise. Armed with more discretionary money, Canadians will likely be eager to spend their money on travel in the immediate future – and probably within the country until borders fully reopen.
CIBC Economics research shows “high earners that sit on the majority of the excess savings also tend to spend more on the sectors most directly impacted by the virus. Income earners in the highest two income quintiles accounted for 57% of spending on recreation, culture, leisure, and accommodations in 2019, suggesting a sharp rebound in demand for those services when they re-open.
And with a savings rate in the double digits, that group can easily finance spending on those sectors through a combination of a reduction in both the flow of new savings and the stock of their existing cash positions.”
Vancouver Island is well positioned to take advantage of full wallets and a desire to travel. The only question is: can struggling live events, tourism and hospitality sectors hang on long enough to ride out the pandemic’s last gasps?