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BALDREY: The one thing BC Liberals and BC NDP share a love for

Thank goodness for megaprojects. That is one of the major takeaways from Central 1 Credit Union’s recently released three-year forecast for the B.C. economy.
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Thank goodness for megaprojects. That is one of the major takeaways from Central 1 Credit Union’s recently released three-year forecast for the B.C. economy.

Central 1’s deputy chief economist Bryan Yu’s fiscal outlook, while not gloomy, certainly suggests we are in for some challenging times. “Global economic growth remains in a fragile state,” is how Yu began his report.

The bad signs are becoming more numerous and will likely be entrenched for some time: global trade uncertainty, a continued slowdown in the housing construction sector and a weakened forest industry. There is also the potentially disastrous fallout from the looming Brexit in Britain and a continued tariff war between the U.S. and China.

“Economic growth is limited by the weak global trade environment, reduced consumer and the downturn of the forest industry,” wrote Yu.

Housing starts in particular are expected to drop off significantly after recent high levels that were largely the result of presales. The wild ride of B.C.’s real estate sector is over and the reverberations will be felt far and wide through an economy that was largely driven by it for a number of years.

In fact, Yu says, housing will actually become a drag on the economy, something that was unheard of just a couple of years ago.

“Its contribution to economic growth will be negative,” Yu says, and notes the housing sector will further decline and then flat line out past 2021. This could be the potential downside of the NDP’s aggressive attempts to cool down the housing market: fewer housing units, which will not solve the rental crisis or improve the chances of buying a house.

Nevertheless, riding to the rescue against this worrisome backdrop are your provincial and federal governments – and a few private investors – which equals: spending big bucks and building great big things.

The massive LNG Canada project, when it starts to take shape, will revitalize much of the province’s northern economy, as thousands of jobs will be created. In his report, Yu singled out the project for its long-term economic benefits.

Closer to home, construction of the Trans Mountain pipeline is scheduled to resume this fall and the new Pattullo Bridge, the Broadway Skytrain extension and the Surrey Skytrain extension will soon begin to generate an enormous amount of economic activity.

And, of course, the Site C dam continues on its construction schedule. At one point this summer, more than 4,500 people a month were employed at the site (also, BC Hydro is spending almost $7 billion on other parts of its mammoth operations).

On top of those megaprojects, the B.C. government plans to spend about $11 billion building all kind of schools, hospitals and roads – or improvements to existing ones – over the next three years, and well into the future after that.

The previous B.C. Liberal government and the current NDP government share a zeal for building or revitalizing infrastructure and since so much of it was built in the 1950s and 1960s that kind of capital spending is going to continue no matter which party holds power in this province.

Yu noted the magnified importance of capital spending by governments, noting that non-residential construction accounted for 60 per cent of all building permits in May.

 But it is those megaprojects which may act as a buffer to any recessionary downturn.

 “Major capital projects will be key drivers of growth over the coming years,” Yu wrote. “Build out of the LNG Canada liquefied natural gas facility in Kitimat and associated pipelines through to 2023, couple with ongoing construction of the Site C dam and twinning of the Trans Mountain pipeline will highlight the rising investment cycle.”

There are a few other bright spots on the horizon, according to Yu. Economic growth will dip a bit but still hover just over two per cent a year, employment numbers should continue to be strong and consumer confidence will remain strong as well.

 “B.C.’s economy is treading modestly through this weaker (global) backdrop,” he wrote. “However, it is not immune to this deteriorating backdrop.”

However, if that dreaded recession does indeed hit B.C., we may be thanking all those construction projects – not just the megaprojects – for preventing this province’s economy from sliding perhaps as far downwards as other provincial economies.

Keith Baldrey is chief political reporter for Global BC. Keith.Baldrey@globalnews.ca

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