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)

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

North Cowichan considers extending tax payment deadline by two months. (File photo)
North Cowichan considers extending deadline for property tax payments

A two-month deadline extension to Sept. 1 gets three readings

John Horn is leaving his position as executive director of the Cowichan Housing Association. (File photo)
John Horn leaving Cowichan Housing Association

Will take on role as executive director of John Howard Society in Nanaimo

Cowichan Tribes Chief William Seymour has taken a medical leave of absence but expects to return soon. (Citizen file)
Chief William Seymour takes leave from office

Seymour will return once fully recovered

A cougar was sighted in the 500 block of Cedar Avenue in Duncan on May 6 at about 9:30 p.m. (Facebook)
Cougar sighted in residential Duncan

Spotted in the Cairnsmore neighbourhood

The Lake Cowichan branch of the Royal Bank of Canada is closing. (Google)
Lake Cowichan’s RBC branch will close in November

RBC says banking needs will still be met

(The Canadian Press)
Trudeau won’t say whether Canada supports patent waiver for COVID-19 vaccines

‘Canada is at the table to help find a solution’

Cannabis bought in British Columbia (Ashley Wadhwani/Black Press Media)
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

A sign indicating face coverings are required by the establishment is pictured on the front door of a business in Vancouver, B.C., Friday, April 9, 2021. COVID-19 cases have been on a steady increase in the province of British Columbia over the past week. THE CANADIAN PRESS/Jonathan Hayward
A sign indicating face coverings are required by the establishment is pictured on the front door of a business in Vancouver, B.C., Friday, April 9, 2021. COVID-19 cases have been on a steady increase in the province of British Columbia over the past week. THE CANADIAN PRESS/Jonathan Hayward
B.C. to start releasing neighbourhood-specific COVID numbers after data leak

Documents obtained by the Vancouver Sun show cases broken down by neighbourhoods

Ladysmith RCMP safely escorted the black bear to the woods near Ladysmith Cemetary. (Town of Ladysmith/Facebook photo)
Black bear tranquillized, relocated after wandering around residential Ladysmith

A juvenile black bear was spotted near 2nd Avenue earlier Friday morning

Provincial health officer Dr. Bonnie Henry and Health Minister Adrian Dix update B.C.’s COVID-19 situation at the B.C. legislature, April 29, 2021. (B.C. government)
B.C.’s COVID-19 case count creeps up, seven more deaths

445 people in hospital, 157 in intensive care

Summerland’s positive test rate is much higher than surrounding local health areas, according to internal BC CDC documents. (BC CDC)
Summerland 3rd behind Surrey, Abbotsford in daily per capita COVID-19 cases

Interior Health is rolling out additional vaccine availability to the community

Amazon is pausing its Prime Day marketing event in Canada this year amid ongoing COVID-19 outbreaks at its facilities in Ontario. THE CANADIAN PRESS/Nathan Denette
Amazon Prime Day halted in Canada due to COVID-19 outbreaks in warehouses

The event was postponed to protect the health and safety of employees and customers, the company says

Ally Thomas, 12, seen in an undated family handout photo, died on April 14 from a suspected overdose. Her family says they are frustrated more public supports weren't available when they tried to get her help. THE CANADIAN PRESS
Minister says suspected overdose death of 12-year-old pushing B.C. to ‘do better’

Minister Sheila Malcolmson of Mental Health and Addictions says the government is working ‘as hard as we can’ to build a system of care for youths

At this Highway 3 check point, police officers will be asking for identification from drivers, documentation regarding the driver’s name and address, and the purpose for the driver’s travel. (RCMP)
No fines handed out at 1st COVID-19 roadblock as checks move across B.C.

Cpl. Chris Manseau says a total of 127 vehicles were stopped at a roadblock in the Manning Park area

Most Read