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

North Island mayors say their voices should be heard by DFO before final decisions are made about fish farms. (Black Press file photo)
Mayors asking to be let in on fish farm consultations

DFO evaluating 18 Discovery Island fish farms and transitioning from open-net farms

Broughton Curling Club. (Clint Fiske photo)
Broughton Curling Club might end season by mid-December

The club is weighing the options and will see what the turnout continues to look like week by week.

Port McNeill councillor Derek Koel busts a rap to help promote the town’s active transportation plan. (Facebook video screenshot)
VIDEO: Port McNeill councillor makes rap video to promote active transportation plan

Active transportation is a personal matter for councillor Derek Koel.

Due to the COVID-19 pandemic, the 10th annual Victor’s Secret Fashion Show has been postponed. (Victor’s Secret 2019 - North Island Gazette file photo)
COVID-19: 10th annual Victor’s Secret Fashion Show has been postponed

The fashion show is an annual fundraiser where local men wear bras made by community members.

B.C. Health Minister Adrian Dix and provincial health officer Dr. Bonnie Henry update the COVID-19 situation at the B.C. legislature, Nov. 23, 2020. (B.C. government)
B.C. sets another COVID-19 record with 887 new cases

Another 13 deaths, ties the highest three days ago

Freighter anchored off Kin Beach in Chemainus. (Photo by Don Bodger)
MP to host expert panel for virtual town hall on freighter anchorages issue

Residents can participate through MacGregor’s website or Facebook page Dec. 3

Lake Cowichan’s Oliver Finlayson, second from left, and his family — including grandma Marnie Mattice, sister Avery, mom Amie Mattice and dad Blair Finlayson — were all smiles on Nov. 16 when their pool arrived, thanks to lots of fundraising and the generosity of the Cowichan Lake community. (Kevin Rothbauer/Citizen)
Cowichan Lake community comes together to help family get vital pool

Oliver Finlayson, 9, has Duchenne muscular dystrophy and hydrotherapy is a big help

Penny Hart is emotional outside the Saanich Police Department as she pleads for helpt to find her son Sean Hart last seen Nov. 6 at a health institution in Saanich. (Devon Bidal/News Staff)
VIDEO: Mother of missing Saanich man begs public to help find her son

Sean Hart last seen leaving Saanich mental health facility Nov. 6

Alexandre Bissonnette, who pleaded guilty to a mass shooting at a Quebec City mosque, arrives at the courthouse in Quebec City on February 21, 2017. THE CANADIAN PRESS/Mathieu Belanger - POOL
Court strikes down consecutive life sentences; mosque shooter has prison term cut

The decision was appealed by both the defence and the Crown

Join Black Press Media and Do Some Good
Join Black Press Media and Do Some Good

Pay it Forward program supports local businesses in their community giving

Gold medallists in the ice dance, free dance figure skating Tessa Virtue and Scott Moir, of Canada, pose during their medals ceremony at the 2018 Winter Olympics in Pyeongchang, South Korea, Tuesday, Feb. 20, 2018. THE CANADIAN PRESS/AP-Charlie Riedel
Olympic champions Virtue, Moir and Tewksbury among 114 Order of Canada inductees

Moir and Virtue catapulted to national stardom with their gold-medal performances at the Winter Olympics in 2018

Shoppers line up in front of a shop on Montreal’s Saint-Catherine Street in search of Black Friday deals in Montreal, Friday, Nov. 27, 2020. THE CANADIAN PRESS/Paul Chiasson
Black Friday shopping in a pandemic: COVID-19 closes some stores, sales move online

Eric Morris, head of retail at Google Canada, says e-commerce in Canada has doubled during the pandemic.

School District 27 announced the first confirmed case of COVID-19 this week (Nov. 23) at Lake City Secondary School Williams Lake campus. (Angie Mindus photo - Williams Lake Tribune)
Entire gym class at northern B.C. high school isolating after confirmed COVID case

Contact tracing by Interior Health led to the quarantine

Most Read