Family visits the Royal B.C. Museum as it reopens after pandemic closure, July 7, 2020. B.C.’s economic forecasts depend on how quickly business and customers have confidence to recover activities and spending. (B.C. government)

B.C.’s COVID-19 deficit could go deeper than $12.5 billion

Scenarios suggest $15 billion or ‘more optimistic’ $10 billion

The B.C. government’s deficit due to coronavirus economic effects has been estimated at $12.5 billion, but it could be 20 or even 30 per cent per cent worse than that, Moody’s Investor Services calculates.

Moody’s issued an update July 20 after B.C. Finance Minister Carole James released the province’s economic outlook, with a mid-range scenario for steep decline and recovery in 2021. This “base case” scenario of a deficit equal to 23 per cent of provincial revenue is “credit negative” but does not affect B.C.’s “AAA stable” credit rating, Moody’s said in a statement.

The $12.5 billion deficit is the middle of three projections, along with a “less optimistic” and “more optimistic” outlook, depending on how the COVID-19 pandemic persists and how well business and employment adapt and recover.

“In addition to its main economic and fiscal scenario, the province presented two alternative scenarios for faster or slower economic recovery,” Moody’s said. “Although the province does not present an estimate of the fiscal effects of its alternative scenarios, we forecast that they could result in a 20-30 per cent improvement or deterioration relative to the projected $12.5 billion 2020-21 deficit.”

Using the more cautious 20 per cent estimate, the “less optimistic” scenario yields a one-year deficit of $15 billion, while the “more optimistic” deficit would be $10 billion.

The massive deficits triggered by COVID-19 have hit credit ratings. In March, Moody’s downgraded Alberta’s credit rating for the second time in four months, from AA to AA Low on the petroleum-dependent province’s long-term debt.

And in June, Fitch Ratings downgraded Canada’s credit rating from AAA to AA+, with Canada’s expected deficit leading industrialized countries at $343 billion and its overall debt set to reach the $1 trillion mark.

RELATED: B.C.’s potential deficit $12.5B as spending soars

RELATED: $343 billion deficit seen in Canada fiscal ‘snapshot’

B.C. has changed its balanced budget legislation to permit three years of deficits, and Moody’s notes that the Bank of Canada commitment to keep interest rates a historic lows will ease the burden of beginning to repay the fast-accumulating debt.

B.C.’s “base case” economic scenario projects a 36.4 per cent drop in corporate profits compared to the February 2020 budget, a 15.9 per cent drop in retail sales and a 27.6 per cent decline in housing sales. All are key tax revenue sources for the province.

Under the “less optimistic” scenario, corporate profits drop 45.3 per cent, retail sales would be down 19.6 per cent and housing sales would be down 36.2 per cent. The “more optimistic” scenario is a 25.6 per cent drop in corporate profits, 9.6 per cent lower retail sales and 14 per cent lower housing sales.

“If local and global health conditions worsen significantly, households and businesses may remain cautious in their decisions for longer, and international trade may be further disrupted,” the finance ministry said in its July 14 economic and fiscal scenario document.


@tomfletcherbc
tfletcher@blackpress.ca

Like us on Facebook and follow us on Twitter.

BC legislatureCoronavirus

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Environment Canada has issued a snow warning for the Kootenays on Friday. File photo
Environment Canada issues snow warning for Friday

Two-to-10 centimetres is expected to fall

Brody Peterson told The Gazette he intends to dispute tickets issued by Grand Forks RCMP at his backyard “house warming” Saturday, Oct. 10. Photo: Laurie Tritschler
Homeowner intends to dispute COVID tickets after backyard party near Grand Forks

Brody Peterson said bands that played at his home shut down before the 11 o’clock cut off

A glimpse of some of the 480 (approx) cars written off as a result of the acid spills along the Trail highway in 2018. Photo: Trail Times
Trail Ford dealer’s frustration grows with ICBC

Trail AM Ford owner Dan Ashman says he just wants fair compensation from ICBC

The fire department will train five more members in the coming months. Photo: Ootischenia Fire Department
New faces coming to the Ootischenia Fire Department

The department has already received numerous firefighting applications

sign
Expect traffic delays Thursday as city works on smoothing Columbia Avenue railroad crossing

The Columbia Ave. and 17th Street railroad crossing has frustrated drivers for quite some time

Provincial health officer Dr. Bonnie Henry presents modelling of COVID-19 spread in B.C., March 25, 2020. (B.C. government photo)
B.C. sets another COVID-19 record with 203 new cases

up to 1,766 active cases in B.C., two more deaths

RCMP. (Phil McLachlan - Black Press Media)
British Columbia man dies during ski trip near glacier west of Calgary

Kananaskis Public Safety and Alpine Helicopters responded around 2:30 p.m.

Join Black Press Media and Do Some Good

Pay it Forward program supports local businesses in their community giving

Is it time to start thinking about greener ways to package cannabis?

Packaging suppliers are still figuring eco-friendly and affordable packaging options that fit the mandates of Cannabis Regulations

Prime Minister Justin Trudeau arrives on Parliament Hill in Ottawa on Monday, Oct. 19, 2020, following a week-long break for the House of Commons. THE CANADIAN PRESS/Sean Kilpatrick
One crisis after another for Trudeau since last federal election one year ago

It has been a year of unprecedented calamity and crisis

Rio Tinto Alcan’s aluminum smelter at Kitimat competes against producers in the Middle East and Russia that have no carbon tax. (Rio Tinto)
B.C. carbon tax highest in Canada, export industries unprotected

B.C. NDP, B.C. Liberals say they’re looking at exemptions

(Pixabay)
Vancouver teacher suspended after swearing, touching students and complimenting underwear

McCabe touched students, including rubbing their backs and necks, touching their hair and hugging them

Jack Vellutini, 100, is still making sweet music. Photo: Submitted
Music stirs memories as Trail serenader nears 101st birthday

Jack Vellutini gave his brass instruments to Trail up-and-comers so the legacy of music can live on

Most Read