Financial Forecasts for 2004

At the beginning of every New Year, economists and business leaders try to predict the province and the country's growth for the coming year. These forecasts provide businesses and investors with an idea of what to expect, and are used by governments to plan their upcoming budgets.

Here are some predictions for 2004:

Independent economic forecast council

In early December, the 13 members of the province's Independent Economic Forecast Council met with BC s Finance Minister Gary Collins to give him their growth projections for 2004. This is an annual meeting for the IEF Council; the Council is required, by the Budget Transparency and Accountability Act, to advise the government as part of the budget process.

The results of the meeting were good news for Collins, as the Council predicted growth rates higher than those predicted by the government itself. The Council predicts growth averages of 2.9% in 2004 (up from an expected 1.7% in 2003) and a further rise to 3.2% in 2005 and beyond, compared to the current forecast from the province's first-quarter report: 1.5% in 2003 and 2.6% in 2004.

Engines for growth

Council members cited improving North American and global economic conditions as key contributors to anticipated growth in the BC economy for 2004. The Council pointed out that as the US economy continues to strengthen BC can expect to see growth, particularly through increased exports. Exports to China are also on the rise.

According to the Business Council of BC's (BCBC) October Economic Snapshot, other key reasons for optimism include rising commodity prices (particularly copper, gold, and other base metals), a booming natural gas industry, robust housing sales, stronger growth in consumer spending, moderate job growth, and improving inter-provincial migration.

In the longer term, there is optimism about the impact the 2010 Olympics will have on the province's economy: In the coming years, for instance, Olympic preparations will lead to strong construction growth, as well as increasing local and international investment.

Reasons for concern

Even with these bright spots ahead, there are still a number of issues that could provide difficulties for the BC economy in the coming year. The BCBC's October Economic Snapshot identifies four key areas of concern: the rapidly appreciating Canadian dollar, the softwood lumber dispute, the lagging tourism sector, and the long-term sustainability of the economic recovery in the US.

Balancing the budget

If all of the aforementioned areas of concern are not addressed, they could pose serious risks to the government's ability to maintain a balanced budget, which is already one of the greatest issues the government will face in 2004.

There is still tough work ahead for the coming years. Many feel that while the most obvious cuts have been made, further reductions are needed in order to achieve and maintain the balanced budget goal. This would mean finding places to make additional cuts that are still palatable to BC voters, which would be a difficult challenge for the government, but one it must complete in order to allow the province to return to prosperity.

By Michelle McCormick, Manager of Public Affairs

Copyright Institute of Chartered Accountants of British Columbia Feb/Mar 2004
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