DEALING WITH THE PANDEMIC – WHAT IS NEXT FOR BC’S ECONOMY NOW?

“BC’s New Democrat government led by Premier John Horgan announced a $2-billion pandemic economic recovery plan, which includes 55 programs – a mix of grants, training programs, and tax cuts.”

By Max Singh

It was all going wonderfully for a 2020 spring and summer in the province of beautiful British Columbia when a tiny virus called Covid 19 came along and brought down not only the region but the global economy to its knees. Virtually every area of commerce, from international airline travel to world trade, transport. Tourism and education have been disrupted. Worldwide, millions of people lost their jobs while the global economy went into a freefall nosedive.

Form April 2020, the lower mainland economy suffered devastating losses as the government ordered mandatory closing or partial closing of establishments such as restaurants, bars, salons, and gyms. British Columbia suffered some of the steepest job losses in the whole of Canada due to its reliance on the service sector as a key employer. BC’s tourism sector flat-lined, and Metro Vancouver, in particular, has been harder hit by the virus-driven recession than other parts of the province due to its reliance on tourism. Despite provincial and Federal help to those workers and businesses affected by the Pandemic, the recovery for the economy during the Pandemic has been slow as the virus shows no sign of decreasing. The possible vaccine still remains in development.

According to Statistics Canada, there were 131,074 active businesses across BC in January 2020 and 117,005 in April 2020. In Metro Vancouver, there were 74,134 active businesses in Jan. 2020 and 65,797 in April 2020, for a drop of 8,337. Thousands of companies have ceased to exist, according to local business councils. Other data backs this up. An October 2020 Statistics Canada report confirmed employment in October that Metro Vancouver is 10.2 percent below February 2020 levels. Tourism is one industry that has suffered immeasurably due to Pandemic. Vancouver Airport alone saw air traffic in April drop off by 97 percent compared with the same month in 2019. The airport authority does not expect to see a full recovery until at least 2022-23 if the Pandemic disappears or a vaccine appears by some miracle. Meanwhile, the hundred-plus cruise ships that frequent Vancouver in the cruise ship season have all disappeared, leaving a massive hole in the city’s economy.

Business Council of BC economist, Ken Peacock, said, “We fully expect more business failures here in the fall months and 2021. They have been supported by government funding, but as those support programs wind up, and we still don’t have fully open situations in business such as bars, gyms, and restaurants, there are going to be more bankruptcies,” he said. “There’s so much lost revenue, and so many smaller businesses hurt as well as more unemployment.

 

3D illustration of Coronavirus, virus which causes SARS and MERS, Middle East Respiratory Syndrome

BC’s New Democrat government led by Premier John Horgan – who ultimately won a snap election in October, announced a $2-billion pandemic economic recovery plan, including 55 programs – a mix of grants, training programs, and tax cuts. In the election campaign, the NDP has focused on promises that would help people who work in the hard-hit service industry, including a cash payout of up to $1,000 for eligible British Columbians and a rent supplement. They also offered more job training to help workers make the transition to in-demand jobs.

Grants for small and medium-sized businesses, a task force dedicated to reviving BC’s ailing tourism sector, and funding aimed at boosting a workforce rattled by record job losses are also among the BC government’s top priorities according to its economic recovery plan. While the program includes $1.5 billion in new spending, the government is also introducing $660 million in new tax incentives and $500 million for a new strategic investment fund.

Among the province’s big direct-spending priorities is a $300-million recovery grant for small and medium-sized businesses that includes what it describes as an “enhanced amount for tourism operators.” One part of it is that the government is the strategy to stimulate employment allocating $300 million to create jobs in the province’s healthcare sector – 5,800 more positions, ranging from support staff at long-term care facilities to contact tracers. Additional infrastructure spending will come by way of the province’s new $100-million Community Economic Recovery Infrastructure program. Another $660 million in new tax incentives come on top of the $1.5 billion in direct spending, including $470 million in new PST rebates on business investments in machinery and equipment.

The province estimates 110,000 businesses are eligible for rebates, and it hopes that the tax savings will encourage expansion as business owners invest significant sums in new machinery. The remaining $190 million of the new tax measures will fund a 15% tax credit for employers who expand their eligible payrolls through the last half of 2020. An independent third party will manage the $500-million strategic investment fund to boost West Coast businesses with high-growth potential. The recovery plan also sees $90 million in direct spending allocated to connecting rural and Indigenous communities to internet services.

The recovery plan comes amid Victoria’s estimates that the provincial economy is set to contract 6.7% by the end of 2020 before expanding by 3% in 2021. Hoping for a balanced budget for the future have been hampered by the cost of dealing with the Pandemic. The governments funding priorities and initiatives will also change as the economic landscape shifts due to a reduced economy and the continuing Pandemic.

The BC economy will inevitably be in a flux state as long as the Pandemic is present. Increasing Covid i19 infection rates in November 2020 forced the government to enforce stricter rules of engagement for the public and protocols for businesses still suffering the effects of a bleak spring and summer.

Nevertheless, there are a few bright spots. Resource industries in rural areas of the province have seen an upturn, as the oil, gas, forestry, mining, and some manufacturing sectors have seen upticks in employment. An October 2020 Statistics Canada report confirmed outside of the metropolitan areas, work in BC has increased by 2.6 percent in the resource industries. Inexplicably –BC’s real estate industry – the most significant economic generator for the past decade has also shown a red hot recovery from pre-pandemic levels with healthy business in all areas of the province. Overall, most economic Forecasters project that British Columbia’s economy will begin to climb with a weak recovery in late 2021. A full recovery to pre-pandemic levels is dependent on whether there is a reliable vaccine for the Covid 19 virus in the future, allowing for a full resumption of economic activity.