Delivered in the first inning of an unprecedented Canada-U.S. trade war, this week’s B.C. budget was out-of-date before it was printed.
While the budget documents acknowledge the threat of U.S. tariffs – and the B.C. government has published estimates of how a bilateral tariff war could affect our economy – the economic and fiscal forecasts underpinning the budget embody an oddly a rosy outlook, basically ignoring the still unfolding bilateral trade conflict.
Rather than economic (real GDP) growth of 1.8 per cent in 2025 and 1.9 per cent the following year – as assumed in the budget – the province is likely to experience a near-term recession, provided the just-announced tariffs are in place for the rest of the year. The outlook for 2026 depends heavily on what happens on the trade front in the next few months.
Once we factor in the American and Canadian retaliatory tariffs, the effect is to render null and void many of the budget’s fiscal projections. True, the Ministry of Finance has included a hefty $12-billion “contingency” to reflect the impact of the tariff war on the government’s bottom line over the revised three-year fiscal plan.
But much of that sum will end up being allocated to cover pay increases still to be negotiated with over 350,000 public sector employees in 2025-26, leaving little room to draw on the contingency funds for other purposes.
Even ignoring the impact of tariffs, the NDP government was planning for a string of epic $10-billion deficits through 2027-28, along with a rapidly rising debt attributable to the rivers of red ink gushing through the operating budget as well as record amounts of borrowing to finance capital projects.
The worst news in the budget is that B.C.’s accumulated taxpayer-supported debt is on track to exceed 34 per cent of GDP by 2027-28. When David Eby was sworn in as premier in the late fall of 2022, the net debt stood at 15 per cent of GDP.
Government debt will have more than doubled, relative to the size of the province’s economy, in five years. The story of B.C.’s debt explosion makes for grim reading and will surely prompt further credit rating downgrades later this year.
Regrettably, Eby’s mismanagement of the books in his first two years in office has left the government’s finances in shambles, just as a trade war begins.
If the budget’s economic and fiscal projections lack credibility, so too does the government’s by now tiresome economic narrative.
B.C. does not enjoy a “strong” economy, if by “strong” one means an economy that reliably produces steady gains in output and real income measured on a per person basis, where the largest export industries are actively encouraged to invest and grow here, and where entrepreneurial ambition and wealth creation are championed as principal drivers of prosperity.
Fundamentally, B.C. is grappling with an unappetizing mix of stagnant productivity, waning competitiveness, sluggish business investment (outside of a few big energy-related projects), very costly housing, and an ever-increasing regulatory burden that is making it harder and costlier for companies to invest and do business across a range of industry sectors.
Little of this is acknowledged, let alone meaningfully addressed, in the budget. For the most part, this is a “more of the same” budget, focused on growing B.C.’s already expansive public sector, and earmarking additional funding for key public services.
We at the Independent Contractors and Businesses Association understand the importance of the latter, but were hoping for a commitment to create a world-class business environment that attracts private sector investment and top talent and fosters the business growth needed to pay for government services.
Finally, the budget forecasts a marginal rise in housing starts beginning in 2025, following a drop last year.
Specifically, starts are predicted to reach 46,540 this year and 47,815 in 2026, up slightly from 2024 but well below the 50,500 starts recorded in 2023.
The projected increases in starts are underwhelming judged against the province’s housing affordability crisis and the cumulative gap between housing supply and demand that has emerged since 2019. More taxes, more regulations, and more public funding for non-market housing – the main implements in the NDP’s housing policy toolbox – do not seem to be producing the results sought by our political leaders.
Jock Finlayson is chief economist of the Independent Contractors and Businesses Association.
