Gross domestic product forecast to bounce back to 4 from 3.5 per cent with Olympic projects
Fiona Anderson
Sun
Spending on infrastructure and major projects leading up to the 2010 Olympics will continue to fuel British Columbia’s construction boom and lead to growth that outpaces the national average, BMO Financial Group said in a report released Monday.
Growth in the province’s real gross domestic product was second only to Alberta in 2005, but at 3.5 per cent it was down slightly from 4.0 per cent in 2004. However, BMO expects B.C.’s economy to bounce back to 4.0-per-cent growth in 2006, behind both Alberta and Newfoundland and Labrador, which are expected to enjoy growth of 5.2 per cent and 5.0 per cent respectively.
But that puts B.C. well ahead of the national average of 3.1 per cent, “an indication of fairly strong growth,” BMO’s assistant chief economist Paul Ferley said in an interview.
Fueling the growth is construction leading up to the 2010 Olympics.
“Construction spending will remain fairly strong this year, a lot of it relating to the 2010 Olympics … and that will help support growth through 2006,” Ferley said.
The province’s construction boom is in its fourth year, with housing starts expected to reach a 12-year high in 2006, but drop off in 2007.
But while residential construction may taper off, a high level of non-residential construction will continue, at least for the next few years, according to the report. A survey of investment intentions carried out by Statistics Canada showed an anticipated 9.5-per-cent increase in non-residential construction in 2006, with almost all of the increase coming from public investment, which is expected to jump 20 per cent. In the first four months of 2006, institutional and governmental building permits were up 25.2 per cent in the province, the report said.
Many major projects currently under construction or expected to start over the medium term, including transportation infrastructure projects and preparations for the 2010 Olympics, should keep the construction boom going in B.C. for several years, the report said. But as the Olympics approach and projects wind down, so will economic growth, with real GDP expected to increase only 3.5 per cent in 2007 and 3.2 in 2008 to 2010.
And though the construction sector continues to boom, the five-per-cent growth the sector enjoyed in 2005 was well below the growth of 8.7 per cent in 2004 and 13.8 per cent in 2003, which reflected the active housing construction industry.
“The pickup in housing was the mainstay in those earlier years and what we’re moving into is an environment where it’s non-residential construction that takes more of the lead, Ferley said. “But that’s not generating quite the activity that housing construction did.”
While BMO expects expects mortgage rates to rise.
© The Vancouver Sun 2006