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

A health-care worker prepares a dose of the Pfizer-BioNTech COVID-19 vaccine at a UHN COVID-19 vaccine clinic January 7, 2021. THE CANADIAN PRESS/Nathan Denette
Employers might be able to require COVID-19 vaccination from employees: B.C. lawyer

‘An employer must make the case’ using expert science, explains lawyer David Mardiros

On Aug. 26, 1947, a fire sparked in the lumber piles between Alberni Pacific Division sawmill and Alberni Plywood (located where Canal Waterfront Park is now). What resulted was a huge fire on Assembly Wharf One, where several buildings were gutted and stacks of lumber were burned. This photo is one of 24,000 contained in the Alberni Valley Museum’s digital archives, at https://portalberni.pastperfectonline.com. (PHOTO PN07386 COURTESY ALBERNI VALLEY MUSEUM)
LOOK BACK: 1947 fire destroys Port Alberni wharf

Take a peek into the Alberni Valley’s history with the Alberni Valley Museum

Artist Jim Holyoak’s installation “Quagmire.” Holyoak will be the first speaker for the Artist Talk Online Winter 2021 series. (SUBMITTED PHOTO)
North Island College Artist Talk goes online for winter 2021

The series invites contemporary Canadian artists to speak about their professional practice

(NEWS FILE PHOTO)
City of Port Alberni, ACRD prepare for compost collection in 2021

Roadside pickup is expected to begin in the City of Port Alberni in June 2021

U.S. Senator Bernie Sanders sits in on a COVID-19 briefing with Dr. Bonnie Henry, provincial health officer, and Adrian Dix, B.C. minister of health. (Birinder Narang/Twitter)
PHOTOS: Bernie Sanders visits B.C. landmarks through the magic of photo editing

Residents jump on viral trend of photoshopping U.S. senator into images

A woman injects herself with crack cocaine at a supervised consumption site Friday, Jan. 22, 2021 in Ottawa. THE CANADIAN PRESS/Adrian Wyld
Drug users at greater risk of dying as services scale back in second wave of COVID-19

It pins the blame largely on a lack of supports, a corrupted drug supply

Wet’suwet’en supporters and Coastal GasLink opponents continue to protest outside the B.C. Legislature in Victoria, B.C., on Thursday, February 27, 2020. THE CANADIAN PRESS/Chad Hipolito
‘We’re still in it’: Wet’suwet’en push forward on rights recognition

The 670-km Coastal GasLink pipeline was approved by B.C. and 20 elected First Nations councils on its path

The sky above Mt. Benson in Nanaimo is illuminated by flares as search and rescuers help an injured hiker down the mountain to a waiting ambulance. (Photo courtesy Nanaimo Search and Rescue)
Search plane lights up Nanaimo mountain with flares during icy rope rescue

Rescuers got injured hiker down Mt. Benson to a waiting ambulance Saturday night

Jennifer Cochrane, a Public Health Nurse with Prairie Mountain Health in Virden, administers the COVID-19 vaccine to Robert Farquhar with Westman Regional Laboratory, during the first day of immunizations at the Brandon COVID-19 vaccination supersite in Brandon, Man., on Monday, January 18, 2021. THE CANADIAN PRESS/Tim Smith - POOL
Top doctor urges Canadians to keep up with COVID measures, even as vaccines roll out

More than 776,606 vaccines have been administered so far

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

From the left: Midway RCMP Csts. Jonathan Stermscheg and Chris Hansen, Public Servant Leanne Mclaren and Cpl. Phil Peters. Pictured in the front are Mclaren’s dog, Lincoln and Peters’ dog, Angel. Photo courtesy of BC RCMP
B.C. Mounties commended for bringing firewood to elderly woman

Cpl. Phil Peters said he and detachment members acted after the woman’s husband went to hospital

Dr. Jerome Leis and Dr. Lynfa Stroud are pictured at Sunnybrook Hospital in Toronto on Thursday, January 21, 2021.THE CANADIAN PRESS/Frank Gunn
‘It wasn’t called COVID at the time:’ One year since Canada’s first COVID-19 case

The 56-year-old man was admitted to Toronto’s Sunnybrook Health Sciences Centre

An Uber driver’s vehicle is seen after the company launched service, in Vancouver, Friday, Jan. 24, 2020. Several taxi companies have lost a court bid to run Uber and Lyft off the road in British Columbia. THE CANADIAN PRESS/Darryl Dyck
Taxi companies lose court bid to quash Uber, Lyft approvals in British Columbia

Uber said in a statement that the ruling of the justice is clear and speaks for itself

Most Read