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VICTORIA – British Columbia’s finances and domestic economy remain strong, but exports and manufacturing shipments have declined in the face of weakening external conditions, Finance Minister Carole Taylor announced with the release of the second Quarterly Report for 2007/08.
“The second quarter report is somewhat a tale of two economies,” said Taylor. “B.C.’s domestic economy continues to show robust growth, with employment gains, and strong retail sales and housing starts. But the performance of B.C.’s export sector is a different matter. I’m certain that the high Canadian dollar and economic conditions in the U.S. will be key topics of discussion when I meet with the Province’s Economic Forecast Council next week.”
Exports and manufacturing shipments have declined throughout 2007, a result of the high Canadian dollar, combined with falling demand and prices for lumber and natural gas. Further deterioration in the U.S. economy, volatile commodity prices, the high Canadian dollar, and continued instability in global financial markets remain key risks to B.C.’s economic outlook.
“Weaker external conditions have a real impact,” said Taylor. “Natural resource revenues are now down $754 million from budget. Fortunately, continued strength on the domestic side, along with our prudent approach to budgeting, is working to keep B.C.’s finances in a healthy position.”
Despite the decline in natural resource revenue, the 2007/08 revenue forecast is up $635 million from the first Quarterly Report, mainly due to prior year income tax adjustments and a resulting higher estimate of the 2007 tax base. Other revenue increases reflect improvements in property transfer tax, federal transfers, and commercial Crown corporation net income.
The 2007/08 forecast surplus has improved to $2.1 billion, $525 million higher than the surplus forecast in the first Quarterly Report.
Compared to the first Quarterly Report, the 2007/08 forecast for spending is up $110 million, taxpayer-supported capital spending is largely unchanged, and taxpayer-supported debt is up $136 million. The taxpayer-supported debt-to-GDP ratio, a key measure of debt affordability, is projected to decline to 13.9 per cent.
In preparation for Budget 2008, the Minister of Finance will consult with the independent
Economic Forecast Council on Dec. 7 to obtain their views on the North American and B.C. economic outlook.
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The second Quarterly Report 2007/08 is available online at www.fin.gov.bc.ca/recent_event.htm
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