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

Victoria police are asking for help locating Izabel Villeneuve, 14, who was last seen Jan. 19. (Courtesy of Victoria Police Department)
Victoria police seek help locating missing 14-year-old

Izabel Villeneuve was last seen in the morning of Jan. 19

Provincial health officer Dr. Bonnie Henry updates B.C.’s COVID-19 situation at the legislature, Jan. 11, 2021. (B.C. government)
Vancouver Island smashes COVID-19 high: 47 new cases in a day

Blowing past previous records, Vancouver Island is not matching B.C.s downward trend

Jan. 21 marks the 21st day of the 21st year of the 21st century, according to some. (Black Press Media file photo)
The 21st day of the 21st year of the 21st century is upon us – maybe

Milestone won’t be back for another 100 years

Environment Canada is forecasting snow for the east Vancouver Island region the weekend of Jan. 23. (Black Press file)
Up to 15 cm of snow forecast for Vancouver Island this weekend

Snow on Malahat to begin Saturday night, according to Environment Canada

The cost of potentially counting deer regionwide was among the issues that prompted Capital Regional District committee members to vote against pursuing a greater CRD role in deer management. (Black Press Media file photo)
Expanded deer management a non-starter for Greater Victoria

Capital Regional District committee maintains current level of support

Businesses continue to struggle under COVID-19 restrictions as the pandemic reaches the one-year mark. (B.C. government)
Another 564 COVID-19 cases, mass vaccine plan coming Friday

15 more deaths, community cluster declared in Williams Lake

Anyone with information on any of these individuals is asked to call 1-800-222-TIPS (8477) or visit the website victoriacrimestoppers.ca for more information.
Greater Victoria Crime Stoppers wanted list for the week of Jan. 19

Greater Victoria Crime Stoppers is seeking the public’s help in locating the… Continue reading

A specialized RCMP team is investigating a suspicious trailer, which might have connections to the illicit drug trade, found abandoned outside a Cache Creek motel. (Photo credit: <em>Journal</em> files)
Police probe U-Haul trailer linked to illicit drugs left outside Cache Creek motel

Hazardous materials found inside believed to be consistent with the production of illicit drugs

Premier John Horgan leaves the podium following his first press conference of the year as he comments on various questions from the media in the Press Gallery at B.C. Legislature in Victoria, B.C., on Monday, January 13, 2020. THE CANADIAN PRESS/Chad Hipolito
Interprovincial travel restrictions a no-go, Horgan says after reviewing legal options

The B.C. NDP government sought legal advice as concerns of travel continue

Gem Lake Top, at Big White Ski Resort, seen at Jan. 8. (Big White Ski Resort)
Big White cancels $7.3M in lift tickets, accommodations due to COVID-19 orders

Since November, the ski resort has been forced to make several changes

Darlene Curylo scratched a $3M ticket, BCLC’s largest ever scratch and win prize. (BCLC)
Kelowna woman in shock after winning BCLC’s largest-ever instant-ticket prize

Darlene Curylo couldn’t believe her eyes when she saw the amount of money she’d won from a scratch ticket

While each person has different reasons for becoming homeless, a UBCO study shows they learn through their interactions with different services to perform ‘as homeless’ based on the expectations of service providers. (Contributed)
Kelowna homeless forced to ‘perform’ for resources, says UBCO study

One participant in the study said ‘It is about looking homeless, but not too homeless’

Aquaculture employee from Vancouver Island, Michelle, poses with a comment that she received on social media. Facebook group Women in Canadian Salmon Farming started an online campaign #enoughisenough to highlight the harassment they were facing online after debates about Discovery Islands fish farms intensified on social media. (Submitted photo)
Female aquaculture employees report online bullying, say divisive debate has turned sexist

Vancouver Island’s female aquaculture employees start #enoughisenough to address misogynistic comments aimed at them

Most Read