Province Of British Columbia 18K/A Annual report (foreign governments) (amended) | SEC 22 Dec 20

Exhibit 99.5

This page
intentionally left blank

FALL 2020 ECONOMIC

FISCAL UPDATE

2020/21 ECONOMIC OUTLOOK AND

FINANCIAL FORECAST

SIX MONTH FINANCIAL RESULTS

APRIL – SEPTEMBER 2020

This page
intentionally left blank

Fall 2020 Economic & Fiscal Update	\| TABLE OF CONTENTS
December 17, 2020

Part One — Updated 2020/21 Financial Forecast

	Introduction			3
	Revenue			4
	Expense			8
		Consolidated Revenue Fund (CRF) Spending		8
		Service Delivery Agency Spending		9
	Topic Box: COVID-19 Pandemic Spending & Related Measures			10
	Provincial Capital Spending			14
		Projects Over $50 Million		14
	Provincial Debt			15
	Risks to the Fiscal Forecast			17
	Supplementary Schedules			18
	Tables:
		1.1	Forecast Update	3
		1.2	Financial Forecast Changes	7
		1.3	Capital Spending Update	14
		1.4	Provincial Debt Update	16
		1.5	Operating Statement	18
		1.6	Revenue by Source	19
		1.7	Expense by Ministry, Program and Agency	20
		1.8	Expense by Function	21
		1.9	Capital Spending	22
		1.10	Capital Expenditure Projects Greater Than $50 million	23
		1.11	Provincial Debt	26
		1.12	Statement of Financial Position	27
		1.13	Material Assumptions – Revenue	28
		1.14	Material Assumptions – Expense	34

Appendix — Description of COVID-19 Measures

	Description of COVID-19 Measures			37


	Fall 2020 Economic & Fiscal Update	│i

Table of Contents

Part Two — Economic Review and Outlook

Summary			45
British Columbia Economic Activity and Outlook			46
	Labour Market		47
	Consumer Spending and Housing		48
	Business and Government		52
	External Trade and Commodity Markets		53
	Demographics		54
	Inflation		55
Risks to the Economic Outlook			56
External Outlook			56
	United States		56
	Canada		59
	Asia		61
	Europe		62
Financial Markets			63
	Interest Rates		63
	Exchange Rate		65
Tables:
	2.1	British Columbia Economic Indicators	46
	2.2	U.S. Real GDP Forecast: Consensus versus B.C. Ministry of Finance	58
	2.3	Canadian Real GDP Forecast: Consensus versus B.C. Ministry of Finance	60
	2.4	Private Sector Canadian Interest Rate Forecasts	64
	2.5	Private Sector Exchange Rate Forecasts	65
	2.6.1	Gross Domestic Product (GDP): British Columbia	66
	2.6.2	Selected Nominal Income and Other Indicators: British Columbia	67
	2.6.3	Labour Market Indicators: British Columbia	67
	2.6.4	Major Economic Assumptions	68


ii│	Fall 2020 Economic & Fiscal Update

PART 1 | UPDATED 2020/21 FINANCIAL FORECAST

Introduction

The Fall 2020 Economic & Fiscal Update provides a revised economic outlook for 2020 and 2021 and fiscal forecast for 2020/21, compared to the projections in the First Quarterly Report released in September.

Similar to other jurisdictions, the B.C. economic outlook has improved. B.C. real GDP is now projected to decline 6.2 per cent in 2020 before rising 3.0 per cent in 2021, compared to a 6.7 per cent decline and 3.0 per cent increase assumed in the First Quarterly Report. This updated outlook remains prudent compared to the average of the private sector forecasts of a 5.2 per cent decline in 2020 and a 4.5 per cent increase in 2021.

The operating deficit is now expected to be $13.6 billion, up $851 million from the First Quarterly Report forecast. This is due to increased spending of $2.3 billion for the BC Recovery Benefit and other programs, partly offset by higher revenues totaling $1.4 billion due in part to economic improvement.

Projected taxpayer-supported capital spending has decreased by $234 million, mainly due to timing of projects in the health sector. The self-supported capital spending forecast is essentially unchanged.

The taxpayer-supported debt forecast is $744 million higher compared to the projection in the First Quarterly Report mainly due to the changes to the operating results. The self-supported debt forecast is essentially unchanged.

The taxpayer-supported debt-to-revenue ratio is now expected to end 2020/21 at 109.7 per cent — a 0.9 percentage point decrease compared to the First Quarterly Report and the taxpayer-supported debt-to-GDP ratio of 20.8 per cent is unchanged from the First Quarterly Report.

Table 1.1 2020/21 Forecast Update

				First
	Budget			Quarterly			Fall 2020
($ millions)	2020			Report			Update
Revenue		60,585			56,013			57,424
Expense		(60,058	)		(67,805	)		(70,067	)
Forecast allowance		(300	)		(1,000	)		(1,000	)
Surplus (deficit)		227			(12,792	)		(13,643	)
Capital Spending:
Taxpayer-supported capital spending		7,126			7,015			6,781
Self-supported capital spending		3,409			3,372			3,365
Total capital spending		10,535			10,387			10,146
Provincial Debt:
Taxpayer-supported debt		49,202			59,802			60,546
Self-supported debt		26,890			27,068			27,080
Total debt (including forecast allowance)		76,392			87,870			88,626
Taxpayer-supported debt to GDP ratio		15.5	%		20.8	%		20.8	%
Taxpayer-supported debt to revenue ratio		84.1	%		110.6	%		109.7	%

Fall 2020 Economic & Fiscal Update

| 3

Updated 2020/21 Financial Forecast

The COVID-19 pandemic continues to have profound global effects on individuals, businesses, non-profit organizations and governments and poses a major risk to the updated plan. The Fall 2020 Update assumes that some sectors such as tourism, recreation and retail are not expected to be operating at full capacity for some time. However, the pace of the development, testing and approvals of coronavirus vaccines represents a remarkable achievement of the collaboration of countries, pharmaceutical companies and health officials around the world. Although many challenges remain, including the global distribution of vaccines and immunization programs, prospects for recovery have improved.

Revenue

Revenue for 2020/21 is forecast to be $57.4 billion — up $1.4 billion from the projection in the First Quarterly Report, but an overall reduction of $3.2 billion from Budget 2020. The increase reflects higher revenue from taxation sources, natural resources, federal government contributions and commercial Crown corporation net income, which are partly offset by deceases in other revenues.

Chart 1.1 Revenue Changes from the First Quarterly Report

Total revenue increases by $1.4 billion

Detailed revenue projections are disclosed in Table 1.6, and key assumptions and sensitivities relating to revenue are provided in Table 1.13. An analysis of historical volatility of major economic drivers can be found in the 2020 British Columbia Financial and Economic Review (pages 16-17). For 2020/21, the major changes in the revenue forecast from the First Quarterly Report include the following:

Income and Employer Health Tax Revenue

Personal income tax revenue is up $171 million, mainly reflecting improved growth projections of household income and employee compensation. In 2020, household income and employee compensation are now forecast to decline 0.6 per cent and 3.9 per cent, respectively, compared to declines of 3.3 per cent and 6.4 per cent assumed in the First Quarterly Report.

4 |

Fall 2020 Economic & Fiscal Update

Updated 2020/21 Financial Forecast

Corporate income tax revenue is up $78 million due to increased instalments ($34 million) and the prior years’ settlement payment ($44 million). Higher instalments from the federal government are based on an updated federal government forecast of national taxable income. The improved settlement payment mainly reflects lower tax credits based on preliminary 2019 tax assessment results.

Employer health tax revenue is up $47 million reflecting assumed improvements in employer payrolls, based on an improved outlook for employee compensation.

Other Tax Revenue

Property transfer tax revenue is up $479 million due to increased sales activity and house prices during the year. The revised outlook of $1,750 million includes the 20 per cent foreign buyers’ tax, forecast at $100 million (down from $109 million estimated in the First Quarterly Report).

Provincial sales tax revenue is down $135 million as the temporary provincial sales tax rebate on selected machinery and equipment purchases announced in the StrongerBC Economic Recovery Plan offsets improvements in year-to-date sales results.

Other taxation revenues are up $2 million as increases in property and tobacco taxes are partly offset by a decline in the fuel tax projection mainly resulting from lower gasoline and diesel purchases.

Natural Resources Revenue

Natural gas royalties are expected to be up $53 million mainly due to higher natural gas prices, increased royalties from natural gas liquids and an improved outlook for natural gas production volumes, partially offset by increased utilization of royalty program credits. The updated natural gas price forecast is $1.08 ($Cdn/gigajoule, plant inlet), up from the First Quarterly Report outlook of $0.86.

Revenue from coal, metals, minerals and other mining-related sources is down $18 million mainly reflecting the negative effects of the COVID-19 pandemic on global prices, demand for mineral products and higher mining-related costs. Revenue from electricity sales under the Columbia River Treaty is up $25 million due to higher Mid-C electricity prices mainly reflecting the retirement of coal and natural gas generating plants in the western U.S. states, combined with significant heat events in the U.S. Southwest in the summer.

Forest revenue is up $96 million mainly due to the effect of higher lumber prices, partly offset by decreased logging tax revenues due to higher refunds related to prior years and a reduction in logging activities. Spruce-pine-fir 2x4 prices have been very strong this year, peaking at US$966/thousand board feet in September. This primarily reflects the resilient demand for wood products in the North American housing market and for household renovation activity, combined with production and transportation supply constraints. Prices have declined recently but remain well above historical levels.

Other natural resource revenues are expected to remain unchanged with slight increases in revenue from petroleum royalties and Oil and Gas Commission fees, offset by decreases in water rental revenue collected under the Water Sustainability Act.

Fall 2020 Economic & Fiscal Update

| 5

Updated 2020/21 Financial Forecast

Other Taxpayer-supported Revenue

Other taxpayer-supported revenue consists of revenue from fees, licences, investment earnings and miscellaneous sources. These revenue sources are now expected to total $8.7 billion, down $48 million from the First Quarterly Report forecast. This change mainly reflects lower projections of miscellaneous revenues by taxpayer-supported Crown corporations and school districts, partly offset by an improved fee revenue forecast from post-secondary institutions.

Federal Government Transfers

Canada Health Transfer and Canada Social Transfer entitlements are up $52 million due to a higher B.C. population share of the national total.

The updated forecast includes $242 million for the Safe Return to Class funding that was not included in the First Quarterly Report projection.

Revenue from other federal government contributions is up $69 million mainly due to a revised outlook of eligible expenses under the Disaster Financial Assistance Arrangements related to wildfires, floods and freshets in the 2016 to 2018 period.

Commercial Crown Corporations

The revised outlook for commercial Crown corporation net income is up $298 million due to improvements from the Insurance Corporation of BC (ICBC) and the BC Liquor Distribution Branch, partly offset by a decrease to the projections for the BC Lottery Corporation.

The forecast for ICBC’s net income is $410 million which is an improvement of $324 million mainly due to savings from lower claims costs because of fewer accidents and a recovery of investment losses sustained at the end of 2019/20. ICBC’s results could be impacted by increased risk and uncertainty for the remainder of the year.

BC Liquor Distribution Branch’s net income is projected at $1.127 billion, up by $35 million due to a combination of an increased number of licensed cannabis stores and a COVID-19 related shift by consumers towards home beverage alcohol consumption, resulting in an increased sales projection.

BC Lottery Corporation’s net income forecast is lower by $61 million compared to the projections in the First Quarterly Report due to the continued closure of casinos as part of the COVID-19 pandemic protective measures. This brings the BCLC’s projected net income to $408 million, a reduction of $955 million from the Budget 2020 projection.

The forecast for BC Hydro’s net income is unchanged at this time. The impacts of COVID-19 relief measures and electricity demand reductions are deferred into the corporation’s regulatory accounts and are not expected to impact net income. However, some operating costs cannot be deferred and may impact BC Hydro’s net income forecast in future quarters.

6 |

Fall 2020 Economic & Fiscal Update

Updated 2020/21 Financial Forecast

Table 1.2 2020/21 Financial Forecast Changes

	($ millions)
*2020/21 surplus at Budget 2020* (February 18, 2020)**		227						227
*2020/21 deficit at the First Quarterly Report* (September 10, 2020)**					(12,792	)

	Q1			Fall 2020			Total
	Update			Update			Changes
Revenue changes:
Personal income tax – mainly expected changes in 2020 household income		(978	)		171			(807	)
Corporate income tax – changes in instalments, mainly reflecting a lower federal government outlook for 2020 national corporate taxable income partly offset by lower deductions relating to non-refundable tax credits		(1,144	)		78			(1,066	)
Provincial sales tax – lower retail sales and consumer expenditures and impacts of tax measures		(1,024	)		(135	)		(1,159	)
Property taxes – mainly reflecting tax relief provided to commercial property owners and lower speculation and vacancy tax		(694	)		7			(687	)
Property transfer tax – changes in year-to-date sales activity in the housing sector		(315	)		479			164
Fuel and carbon taxes – lower gasoline and diesel volume sales and delay of the carbon tax rate increase from April 1, 020 to April 1, 021		(469	)		(15	)		(484	)
Employer health tax – mainly expected decline in employee compensation		(148	)		47			(101	)
Other taxation sources – impacts of 2019/20 Public Accounts and year-to-date results		20			10			30
Mining – lower coal prices and production and higher costs		(84	)		(18	)		(102	)
Forests – higher stumpage rates partly offset by lower logging tax revenue and lower harvest volumes		30			96			126
Other natural resources – commodity prices and production volumes, utilization of royalty infrastructure programs/credits and decreased revenue from water rentals		(190	)		78			(112	)
Fees, licences, investment earnings and miscellaneous sources:
Post-secondary institutions		(673	)		67			(606	)
K-12 school districts		(137	)		(25	)		(162	)
Taxpayer-supported Crowns		(111	)		(94	)		(205	)
Other sources – lower fees from Health Authorities and reduced motor vehicle fees and fines		(76	)		4			(72	)
COVID-19 related federal government funding		2,376			242			2,618
Other federal government transfers – mainly changes in B.C.’s share of federal excise tax revenue on cannabis and transfers under the Disaster Financial Assistance Arrangements		(22	)		121			99
Commercial Crown corporation net income – ICBC, BC Lottery Corp and the Liquor Distribution Branch		(933	)		298			(635	)
Total revenue changes		(4,572	)		1,411			(3,161	)

Less: expense increases (decreases):
Consolidated Revenue Fund changes:
COVID-19 Contingencies – Vote 52: Pandemic Response and Economic Recovery		5,000			2,000			7,000
Federal-Provincial cost-shared investments under the Safe Restart Agreement:
Provincial portion (COVID-19 Contingencies - Vote 53)		810			-			810
Federal portion		810			-			810
Statutory spending:
Fire management costs		76			2			78
Emergency Program Act		94			26			120
Signed agreements under the Sustainable Services Negotiating Mandate		310			37			347
COVID-19 temporary pandemic pay ¹		425			(41	)		384
Housing Priority Initiatives Special Account – purchase of hotels to house decamped homeless populations		111			-			111
Other statutory spending – mainly Elections BC		14			71			85
Refundable tax credits:
One-time enhancement of the Climate Action Tax Credit		500			-			500
Other refundable tax credits		(86	)		31			(55	)
Other expense changes – mainly management of public debt net borrowing costs		88			(15	)		73
Spending funded by third party recoveries - mainly Safe Return to Class funding from the federal government		(30	)		310			280
Changes in spending profile of service delivery agencies:
School districts		152			214			366
Universities		(61	)		(14	)		(75	)
Colleges		(23	)		2			(21	)
Health authorities and hospital societies		229			1,137			1,366
Other service delivery agencies ²		609			(165	)		444
(Increase) decrease in transfers to service delivery agencies (elimination)		(1,281	)		(1,333	)		(2,614	)
Total expense changes		7,747			2,262			10,009
Subtotal		(12,319	)		(851	)		(13,170	)
Forecast allowance (increase) decrease		(700	)		-			(700	)
Total changes		(13,019	)		(851	)		(13,870	)
2020/21 deficit at the First Quarterly Report		(12,792	)
2020/21 deficit at the Fall 2020 Economic & Fiscal Update					(13,643	)		(13,643	)

¹ Total COVID-19 temporary pandemic pay remains at $425 million, however $41 million is included as part of Contingencies Vote 52 spending.

² Includes BC Transportation Financing Authority, BC Transit, BC Housing Management Commission, Community Living BC, and other entities.

Fall 2020 Economic & Fiscal Update

| 7

Updated 2020/21 Financial Forecast

Expense

The Fall 2020 Update expense forecast for 2020/21 is $2.3 billion higher than the First Quarterly Report, and $10.0 billion higher than the Budget 2020 forecast, mainly due to increased spending related to the COVID-19 pandemic.

Chart 1.2 Expense Changes from the First Quarterly Report

Total expense increases by $2.3 billion

Consolidated Revenue Fund (CRF) Spending

The total CRF direct program spending¹forecast for 2020/21 has increased by $1.1 billion — this reflects a $2.4 billion gross increase in CRF spending related to COVID-19 pandemic and statutory expenses, offset by $1.3 billion in changes to operating transfers to the service delivery agencies.

Since the First Quarterly Report, the government has tabled Supplementary Estimates to increase the funding for Pandemic Response and Economic Recovery (Vote 52) by $2 billion, bringing the total appropriation to $7 billion.

The full range of the provincial measures in response to the COVID-19 crisis is outlined in the topic box (pages 10-13), including spending details for the COVID-19 Contingencies Vote 52 (Pandemic Response and Economic Recovery) and Vote 53 (Federal and Provincial Pandemic Support).

Statutory spending is projected to increase by $126 million since the First Quarterly Report due to the following:

	·	$37 million for signed agreements under the Sustainable Services Negotiating Mandate;

	·	$68 million for Elections BC for the administration of the October 2020 Provincial General Election;

	·	$26 million for Emergency Program Act expenses primarily for costs in response to the COVID-19 pandemic ($24 million);

	·	$31 million in higher refundable tax credits; offset by

	·	$36 million net decrease in other statutory spending.

¹	Expenses other than grants to government agencies — see Table 1.7 Total direct program spending.

8 |

Fall 2020 Economic & Fiscal Update

Updated 2020/21 Financial Forecast

Debt servicing costs are forecast to be $15 million lower than the First Quarterly Report due to a reduced interest rate forecast.

Contingencies (All Ministries) and New Programs – Vote 45

The Contingencies Vote in 2020/21 remains unchanged from Budget 2020 at $1.066 billion, notionally allocated as follows:

$600 million to help manage uncertain costs and pressures including funding for increases in demand-driven programs and priority initiatives; and

$466 million notionally allocated to support new collective agreements consistent with Sustainable Services Negotiating Mandate.

Statutory spending authority of $347 million is forecast to be utilized for the increases to salary and benefit payments negotiated under the Sustainable Services Negotiating Mandate. As a result, further capacity in the Contingencies Vote will be available to help manage emerging costs and pressures.

Spending Recovered from Third Parties

Expenses funded by third parties are forecast to increase by $310 million mainly due to $242 million in federal contributions to support safe return to school, and a $64 million increase in the allowance for doubtful accounts related to various revenue streams.

Operating Transfers to Service Delivery Agencies

Operating transfers to service delivery agencies are forecast to be $1.3 billion higher than the First Quarterly Report mainly due to increased allocations to the health authorities and school districts to fund additional expenses related to the COVID-19 pandemic. These funding increases are related to spending forecast changes noted below.

Service Delivery Agency Spending

Service delivery agency expenses are forecast to increase by $1.2 billion in 2020/21 from the First Quarterly Report.

School district expense forecasts are higher by $214 million to support safe return to school during the COVID-19 pandemic, funded by increased federal contributions. This is in addition to the $46 million of provincial funding which was included in the First Quarterly Report.

Post-secondary sector expenses are forecast to decrease by $12 million mainly due to lower operating costs as a result of the COVID-19 pandemic.

The health authority and hospital society expense forecast is up $1.1 billion, mainly due to higher staffing and equipment needs in response to the COVID-19 pandemic. This includes personal protective equipment, testing equipment, ventilators and beds as well as contact tracing and increased rural and remote community supports.

Other service delivery agency spending is forecast to be $165 million lower mainly due to revised spending assumptions from BC Housing, BC Infrastructure Benefits, BC Transit and BC Transportation Financing Authority as the effects of the COVID-19 pandemic become more clear.

Detailed expense projections are disclosed in Table 1.7. Key spending assumptions and sensitivities are provided in Table 1.14.

Fall 2020 Economic & Fiscal Update

| 9

Updated 2020/21 Financial Forecast

COVID-19 Pandemic Spending & Related Measures

This section provides an overview of the Province’s pandemic response measures, including an update on notional allocations within the Pandemic Contingencies votes as of November 30, 2020, as well as a summary of tax and payment relief and deferral measures.

Vote 52 Contingencies (All Ministries): Pandemic Response and Economic Recovery

On March 23, 2020, the Legislative Assembly authorized Supplementary Estimates of $5 billion and a new Vote 52 – Contingencies for Pandemic Response and Economic Recovery (Pandemic Contingencies). Government allocated $3.5 billion

Table 1 – Vote 52 Pandemic Contingencies Allocations as of November 30, 2020

Category	Notional	Measures
	Allocation
	$1.36 billion¹	Health and mental health
	$191 million²	Child care services
Critical Services	$158 million	Temporary housing, meals and supports for vulnerable populations
	$53 million	Essential services for adults with developmental disabilities, vulnerable children and youth, family justice and victim services, public health communications, Urban Indigenous Service Providers and domestic migrant agriculture worker accommodations
	$900 million	BC Emergency Benefit for Workers
	$624 million	Crisis Supplement and other supports for income and disability assistance clients
	$129 million	Temporary Rental Supplement
Financial supports	$41 million³	Pandemic Pay related incremental payroll deductions (e.g. EI, CPP and EHT)
	$64 million	Emergency financial relief for organizations providing animal care, the agriculture sector, park operators and community tourism organizations, Domestic Motion Picture providers, local sports organizations and BC Pavilion Corporation.
	$20 million	Canada Emergency Commercial Rent Assistance Program
Economic Recovery	$1.5 billion	As detailed in the StrongerBC Economic Recovery Plan.
Sub-total	$5.04 billion	Supplementary Estimates – March 2020
Supplementary Estimates - December	$2 billion	For the BC Recovery Benefit, the BC Recovery Supplement and the Increased Employment Incentive
Total	$7.04 billion	Pandemic Contingencies Spending Measures

¹ An additional $300 million in new health care related job opportunities is included in the economic recovery envelope.

² The total estimate for the temporary emergency funding for child care providers is $319 million, however, the Ministry of Children and Family Development is redirecting some base budget funding to offset the new program costs, reducing the overall forecasted draw on Contingencies.

³ The total estimate for the provincial-federal cost-shared Pandemic Pay program is $425 million. The Province is providing an estimated total of $106 million, of which, $41 million is funded through Vote 52 and $65 million is funded through statutory spending under the Financial Administration Act.

10 |

Fall 2020 Economic & Fiscal Update

Updated 2020/21 Financial Forecast

of the $5 billion Pandemic Contingencies for critical services and financial relief measures and $1.5 billion for economic recovery measures as presented in the StrongerBC Economic Recovery Plan in September.

Critical services include health and mental health related responses, supports for child care providers, and providing essential social services to vulnerable populations such as adults with developmental disabilities, people experiencing homelessness, and children, youth and young adults receiving provincial supports.

Financial relief measures include income supports, such as the BC Emergency Benefit for Workers, and the crisis supplement for income and disability assistance clients including low-income seniors. Measures also include rental relief assistance for individuals, families and businesses, and targeted financial relief for a number of sectors.

Economic recovery spending measures include a grant program for small and medium sized businesses, training and job creation initiatives including new jobs to help people enter the health sector. Other measures include community infrastructure grants and projects, support for the tourism sector and programs to increase food security. Other economic recovery spending measures include provincial funding to support K-12 students to return to classrooms, and funding for CleanBC initiatives and other technology and innovation programs and initiatives.

Details of the Pandemic Contingencies notional allocations as of November 30, 2020 are shown in Table 1. The key changes from the First Quarterly Report (Q1) include increased allocations for health care services as well as updated forecasts for critical services and financial supports based on updated projections on client demand and cost, including:

Child care services –educed from $254 million at Q1 to $191 million based on the ministry redirecting some existing base budget funding to the program to reduce the forecasted draw on Contingencies;

Crisis Supplement and other income and disability assistance supports – reduced from $685 million at Q1 to $624 million;

Temporary Rent Supplement – reduced from $149 million at Q1 to $129 million;

Pandemic Pay – payroll related expenses (e.g. EI, CPP, EHT, etc.) of $41 million funded out of Pandemic Contingencies; and

Canada Emergency Commercial Rent Assistance Program – reduced from $79 million at Q1 to $20 million.

The table also includes $2 billion for supplementary estimates tabled in December 2020. The supplementary estimates will provide funding for the one-time BC Recovery Benefit ($1.7 billion), the BC Recovery Supplement which will provide income and disability assistance clients with $150 per month top-up from January to March 2021 ($110 million), and to fund the Increased Employment Incentive tax credit announced as part of the StrongerBC Economic Recovery Plan ($190 million). While the Increased Employment Incentive program will be administered through the Employer Health Tax Act (and would therefore normally constitute “statutory spending” and not need appropriation authority), the legislative changes required will likely not be in place prior to the scheduled payments. Therefore, additional voted appropriation will be needed to enable the anticipated payments. Allocations for any new or extended measures will be subject to the approval of Cabinet and Treasury Board.

Vote 53 Contingencies (All Ministries): Federal and Provincial Pandemic Support

On July 16, 2020, the federal, provincial and territorial governments announced plans for a Safe Restart Agreement, which aimed to support the reopening of provincial and territorial economies over the next six to eight months.

Under the Agreement, the federal government has committed close to $2 billion for B.C. While approximately $1.15 billion of the federal funding will be used to help fund the cost of continuing significant measures in B.C. that are underway or planned, part of the agreement requires 50/50 provincial/federal cost-sharing. This relates specifically to municipal and transit-related relief and restart measures.

Fall 2020 Economic & Fiscal Update

| 11

Updated 2020/21 Financial Forecast

Table 2: – Vote 53 Federal and Provincial Contingencies Allocations as of November 30, 2020

	Provincial Allocation	Federal Allocation	Total
Municipalities	$270 million	$270 million	$540 million
Transit	$540 million	$540 million	$1,080 million
Total	$810 million	$810 million	$1.620 billion

On August 14, 2020, the Legislative Assembly authorized Vote 53 Contingencies (All Ministries): Federal and Provincial Pandemic Support. The Vote 53 Contingencies provides up to $1 billion net spending appropriation for the Province to support the cost-share arrangement for municipal and transit funding, and other pandemic priorities.

Current provincial spending allocations for Vote 53 are $810 million for municipal and transit related restart supports as shown in Table 2.

Other COVID-19 Response and Relief Measures

In addition to the Vote 52 and Vote 53 Pandemic Contingencies spending measures, government has implemented a number of other measures which include tax and revenue measures, and statutory spending related to COVID-19.

Tax measures includes a reduction in school tax for commercial properties by an average of 25 per cent in the 2020 calendar year (estimated at $714 million in reduced taxes) and the one-time Climate Action Tax Credit enhancement (estimated $500 million). Government has also delayed the scheduled increase to the carbon tax rate and other Budget 2020 tax measures to April 1, 2021, estimated to reduce taxes by $268 million.

As part of the StrongerBC Economic Recovery Plan, government also introduced a temporary PST exemption on select machinery and equipment to support businesses that are pivoting their operations in response to the pandemic. The PST exemption is estimated to save businesses $470 million.

Revenue relief measures include temporary wholesale pricing for restaurants, bars and tourism operators with liquor licences, and ICBC payment relief and deferral measures.

Statutory spending directly related to COVID-19 includes funding for the Pandemic Pay for frontline workers in health and social sectors (a federal-provincial cost-sharing initiative), hotel purchases to support homelessness response measures, and spending related to COVID-19 emergency coordination and response.

Government also approved revised spending targets for the Forest Enhancement Society to ensure its tree planting continues as planned to secure future economic and environmental benefits while meeting the new COVID-19 related guidelines for industrial camps.

The estimated provincial value of these measures is nearly $2.3 billion as shown in Table 3.

Government has also implemented payment deferral measures to provide administrative and financial relief to individuals, businesses and municipalities. This includes a six-month moratorium on student loan collection, BC Hydro bill relief for residential and commercial customers, and bill deferrals for industrial customers and deferred school tax remittance for municipalities. Government also provided administrative relief by extending tax filing and payment deadlines for the employer health tax, provincial sales tax, municipal and regional district tax on short-term accommodation, tobacco tax, motor fuel tax, and carbon tax. The estimated value of eligible deferrals is over $6.2 billion as shown in Table 4. The majority of these deferral measures have since concluded, with the exception of the employer health tax instalment payment deadline extension.

As deferral payments are expected to be received at a later date, they do not directly impact the fiscal plan. There may be payment defaults on some of these revenues owed to government, depending on the breadth and duration of the pandemic, as well as consumer and business confidence and behaviour. As cash payments are received starting in October, any adjustments related to doubtful accounts will be made if necessary and incorporated into the fiscal forecasts.

12 |

Fall 2020 Economic & Fiscal Update

Updated 2020/21 Financial Forecast

Table 3 – Other Response and Temporary Relief Measures as of November 30, 2020

Estimated Cost	Measure
$714 million	Reduced school tax for commercial properties for the 2020 calendar year
$500 million	Climate Action Tax Credit one-time enhancement
$470 million¹	Temporary PST rebate on select machinery and equipment
$65 million ($384 million total federal-provincial)²	Pandemic Pay for Frontline Workers
$268 million	Delays to the planned increase in the carbon tax rate and delays in effective date of other new tax measures
$111 million	Purchase of hotels to house decamped homeless populations
$68 million	Emergency Program Act – COVID-19 related coordination and measures
$26 million	Temporary wholesale pricing for liquor licensees
$17 million	ICBC temporary fee relief measures
$11 million	Forest Enhancement Society of BC –tree planting camps
$3 million	Commercial Recreation Tenures and Permits financial relief
$2.253 billion	Provincial Total for Other Response and Temporary Relief Measures

¹ $235 million in 2020/21 and $235 million in 2021/22.

² $41 million in provincial allocation for Pandemic Pay payroll related expenses is funded from Vote 52, for a total provincial contribution of $106 million (and total federal-provincial allocation of $425 million).

Table 4 – Payment Deferral Measures (no direct operating fiscal impact)

Estimated value of deferral	Measure
$70 million	Six-month moratorium on student fee collection
$103 million	BC Hydro bill deferrals for industrial customers and bill relief measures
Over $1 billion	Postponing municipal remittance date for school taxes to the end of the calendar year
Over $5 billion	Extended tax filing and payment deadlines for the employer health tax, provincial sales tax, municipal and regional district tax on short-term accommodation, tobacco tax, motor fuel tax, and carbon tax
Over $6.2 billion	Total Value of Deferrals

*Note: All deferral measures have since concluded, with the exception of the employer health tax instalment payment deadline extension.

Descriptions of all measures can be found in the Appendix (page 37).

Fall 2020 Economic & Fiscal Update

| 13

Updated 2020/21 Financial Forecast

Provincial Capital Spending

Capital spending is projected to total $10.1 billion in 2020/21, $241 million lower than the forecast in the First Quarterly Report (see Tables 1.3 and 1.9).

Table 1.3 2020/21 Capital Spending Update
	($ millions)
2020/21 capital spending at Budget 2020		10,535				10,535
2020/21 capital spending at the First Quarterly Report				10,387

		Q1		Fall 2020		Total
		Update		Update		Changes
Taxpayer-supported changes:
Primarily changes in own-source school district spending		49		(40	)	9
Timing of post-secondary institution spending		(26	)	8		(18	)
Timing of health authority spending		(52	)	(117	)	(169	)
Timing of transportation sector spending		(210	)	(29	)	(239	)
Higher social housing spending		124		(26	)	98
Other net adjustments to capital schedules		4		(30	)	(26	)
Total taxpayer-supported		(111	)	(234	)	(345	)
Self-supported changes:
Timing of Liquor Distribution Branch spending		(32	)	(7	)	(39	)
Timing of BC Hydro spending		-		5		5
Lower other spending		(5	)	(5	)	(10	)
Total self-supported		(37	)	(7	)	(44	)
Total changes		(148	)	(241	)	(389	)
2020/21 capital spending at the First Quarterly Report		10,387
2020/21 capital spending at the Fall 2020 Economic & Fiscal Update				10,146		10,146

Taxpayer-supported capital spending is projected at $6.8 billion. The $234 million decrease since the First Quarterly Report is mainly due to changes in project timing, in particular the timing of health projects. There are also smaller changes due to the timing of projects in other sectors, such as some school district projects.

At $3.4 billion, self-supported capital spending is $7 million lower than the First Quarterly Report mainly because of lower spending by the Liquor Distribution Branch.

Projects Over $50 Million

Approved major capital projects with budgets greater than $50 million are presented in Table 1.10. Since the First Quarterly Report three projects have been added to the table:

British Columbia Institute of Technology Student Housing project ($115 million);

Royal BC Museum – Collections and Research Building project ($177 million); and

BC Hydro’s 5L063 Telkwa relocation project ($66 million).

14 |

Fall 2020 Economic & Fiscal Update

Updated 2020/21 Financial Forecast

The following projects have been completed since the First Quarterly Report and are no longer listed in the table:

R.E. Mountain Secondary (Willoughby Slope); and

BC Hydro’s Ruskin Dam safety and powerhouse upgrade project and Cheakamus unit 1 and 2 generator replacement project.

Changes since the First Quarterly Report for existing projects include:

The Centennial Secondary School project completion date changed from 2020 to 2021 to align with the revised project schedule;

South Side Area Elementary Middle project name changed to Stitos Elementary Middle;

Sheffield Elementary project completion date changed from 2021 to 2022 to align with the revised project schedule;

Kootenay Lake ferry service upgrade project costs increased from $55 million to $85 million reflecting updated costing at procurement for construction at the inland assembly site;

The Broadway Subway project provincial contribution decreased from $1.83 billion to $1.38 billion as $450 million in private financing is now finalized with the awarding of the construction contract;

6585 Sussex Ave (Affordable Rental Housing) project completion date changed from 2022 to 2021 to align with the revised project schedule;

Mount Lehman substation upgrade project completion date changed from 2022 to 2023 to align with the revised project schedule; and

Enhanced Care Coverage Program (ICBC) project costs increased from $94 million to $96 million.

Provincial Debt

The provincial debt, including a $1 billion forecast allowance, is projected to total $88.6 billion by the end of the fiscal year — $756 million higher than the forecast in the First Quarterly Report.

Taxpayer-supported debt is forecast to be $60.5 billion at the end of 2020/21 — $744 million higher than forecast in the First Quarterly Report. This increase reflects the change in operating results of $851 million, $81 million for changes to asset and liability balances, and lower capital contributions from external parties of $46 million, partially offset by lower capital spending of $234 million.

The taxpayer-supported debt-to-GDP ratio is projected to be 20.8 per cent — unchanged from the First Quarterly Report.

The taxpayer-supported debt-to-revenue ratio is forecast to end the fiscal year at 109.7 per cent — a 0.9 percentage point improvement from the First Quarterly Report.

Self-supported debt is forecast to be $27.1 billion at the end of 2020/21 — $12 million higher than the First Quarterly Report reflecting lower than expected internal financing ($19 million), partly offset by a decrease in capital infrastructure investments ($7 million).

Fall 2020 Economic & Fiscal Update

| 15

Updated 2020/21 Financial Forecast

Table 1.4 2020/21 Provincial Debt Update

	($ millions)
2020/21 provincial debt forecast at Budget 2020	76,392				76,392
2020/21 provincial debt forecast at the First Quarterly Report			87,870

	Q1		Fall 2020		Total
	Update		Update		Changes
Taxpayer-supported changes:
Higher debt level from 2019/20	1,660		-		1,660
Change in operating results (before forecast allowance)	12,319		851		13,170
Increase in cash and temporary investments	1,342		220		1,562
Decrease in accounts receivable	(592	)	(111	)	(703	)
Decrease in loans, advances and mortgages receivable	(1,185	)	(151	)	(1,336	)
Decrease in sinking fund balances	(193	)	5		(188	)
Decrease in prepaid program costs and other non-financial assets	(538	)	156		(382	)
Increase in accounts payable and deferred revenue	(2,183	)	(38	)	(2,221	)
Lower capital contributions from external parties	81		46		127
Lower capital spending	(111	)	(234	)	(345	)
Total taxpayer-supported	10,600		744		11,344

Self-supported changes:
Higher debt level from 2019/20	163		-		163
Lower capital spending	(37	)	(7	)	(44	)
Changes in internal financing	52		19		71
Total self-supported	178		12		190
Forecast allowance increase	700		-		700
Total changes	11,478		756		12,234
2020/21 provincial debt forecast at the First Quarterly Report	87,870
2020/21 provincial debt forecast at the Fall 2020 Economic & Fiscal Update			88,626		88,626

While there is an increase in borrowing and higher debt levels, the B.C. government is able to borrow at low interest rates, and as a result debt affordability remains at levels that are lower than they have been historically, as shown in Chart 1.3 below.

Chart 1.3 Debt Affordability

Details on provincial debt are shown in Table 1.11.

16 |

Fall 2020 Economic & Fiscal Update

Updated 2020/21 Financial Forecast

Risks to the Fiscal Forecast

The global response to the COVID-19 pandemic to protect the health and safety of people includes social distancing rules, self-isolation processes, border closures and restrictions and shutdowns in some sectoral and regional parts of the economy. Governments around the world have implemented various measures and strategies to provide liquidity and financial relief to individuals and businesses.

The major risks to the updated economic and fiscal forecasts continue to be the extent of the spread or containment of the virus in B.C. and its major trading partners; the timing, efficacy, availability and distribution of COVID-19 vaccines; and the behaviour and confidence of individuals, consumers and businesses during Phase 3 of the BC Restart Plan. The uncertainty of the depth and duration of the pandemic as well as the pace and timing of the recovery contributes to the potential volatility in the updated economic and fiscal outlooks.

Personal and corporate income tax assessments for the 2019 tax year will not be finalized until March 2021. Extended filing dates provided to individuals and business to file their income tax returns means that less information is available now which could result in further revenue and tax transfer expense adjustments related to the 2019 income tax entitlement. In addition, the federal government could amend the corporate income tax cash advances currently in the forecast, resulting in changes to the corporate income tax revenue outlook. Property transfer tax and provincial sales tax revenues are impacted by consumer and business confidence, the number of residential transactions, average home sale prices and the amount of taxable purchases of goods and services. The global COVID-19 pandemic has resulted in heightened risks to these and other factors affecting own source revenues, including the net income of commercial Crown corporations.

The spending forecast contained in the fiscal plan is based on ministry and service delivery agency plans and strategies, including $7.81 billion in additional spending appropriated for COVID-19 through Supplementary Estimates. Risks to the fiscal forecast include the extent of the spread of the COVID-19 virus which may require additional spending, as well as changes in planning assumptions such as utilization or demand rates for government services in the health care, education, and community social services sectors.

Capital spending may be influenced by several factors including physical distancing on work sites, design development, procurement activity, weather, geotechnical conditions and interest rates. Risks associated with operating results and capital spending could also affect debt levels.

In recognition of the heightened risks, the updated forecast in 20202/21 includes a $1.0 billion forecast allowance, unchanged from the First Quarterly Report and a $700 million increase from Budget 2020.

Actual operating results, capital spending and debt figures may differ from the current forecast. Variables will continue to change throughout the year as new information becomes available, with potentially material impacts. Government will provide an update to the fiscal plan in Budget 2021.

Fall 2020 Economic & Fiscal Update

| 17

Updated 2020/21 Financial Forecast

Supplementary Schedules

The following tables provide the financial results for the six months ended September 30, 2020 and the 2020/21 full-year forecast.

Table 1.5 2020/21 Operating Statement

	Year-to-Date to September 30									Full Year
		2020 /21						Actual			2020 /21						Actual
($ millions)		Budget		Actual		Variance		2019/20			Budget		Forecast		Variance		2019/20
Revenue		30,124		29,144		(980	)	29,089			60,585		57,424		(3,161	)	58,660
Expense		(28,254	)	(29,570	)	(1,316	)	(27,735	)		(60,058	)	(70,067	)	(10,009	)	(58,981	)
Surplus (deficit) before forecast allowance		1,870		(426	)	(2,296	)	1,354			527		(12,643	)	(13,170	)	(321	)
Forecast allowance		-		-		-		-			(300	)	(1,000	)	(700	)	-
Surplus (deficit)		1,870		(426	)	(2,296	)	1,354			227		(13,643	)	(13,870	)	(321	)
Accumulated surplus beginning of the year		8,754		8,106		(648	)	8,551			8,754		8,106		(648	)	8,427
Accumulated surplus (deficit) before comprehensive income		10,624		7,680		(2,944	)	9,905			8,981		(5,537	)	(14,518	)	8,106
Accumulated other comprehensive income from self-supported Crown agencies		45		808		763		239			65		681		616		(224	)
Accumulated surplus (deficit) end of period		10,669		8,488		(2,181	)	10,144			9,046		(4,856	)	(13,902	)	7,882

18 |

Fall 2020 Economic & Fiscal Update

Updated 2020/21 Financial Forecast

Table 1.6 2020/21 Revenue by Source

	Year-to-Date to September 30								Full Year
		2020/21					Actual			2020 /21					Actual
($ millions)		Budget		Actual	Variance		2019/20			Budget	Forecast		Variance		2019/20
Taxation
Personal income		5,821		5,342	(479	)	5,439			11,771	10,964		(807	)	10,657
Corporate income		3,119		2,934	(185	)	2,763			4,739	3,673		(1,066	)	5,011
Employer health		966		913	(53	)	927			1,924	1,823		(101	)	1,897
Sales ¹		4,176		3,684	(492	)	3,918			7,905	6,746		(1,159	)	7,374
Fuel		537		467	(70	)	532			1,024	934		(90	)	1,008
Carbon		929		727	(202	)	793			1,954	1,560		(394	)	1,682
Tobacco		414		411	(3	)	393			755	740		(15	)	729
Property		1,499		1,228	(271	)	1,350			3,026	2,339		(687	)	2,608
Property transfer		880		871	(9	)	821			1,586	1,750		164		1,609
Insurance premium		330		330	-		312			660	705		45		691
		18,671		16,907	(1,764	)	17,248			35,344	31,234		(4,110	)	33,266
Natural resources
Natural gas royalties		100		46	(54	)	46			207	147		(60	)	118
Forests		375		388	13		471			867	993		126		988
Other natural resources ²		542		445	(97	)	672			1,075	921		(154	)	1,162
		1,017		879	(138	)	1,189			2,149	2,061		(88	)	2,268
Other revenue
Medical Services Plan premiums		-		-	-		705			-	(4	)	(4	)	1,063
Post-secondary education fees		929		849	(80	)	883			2,578	2,304		(274	)	2,451
Other fees and licenses ³		1,029		932	(97	)	1,019			2,089	1,898		(191	)	2,058
Investment earnings		643		616	(27	)	601			1,247	1,228		(19	)	1,263
Miscellaneous ⁴		1,789		1,635	(154	)	1,683			3,798	3,241		(557	)	3,838
		4,390		4,032	(358	)	4,891			9,712	8,667		(1,045	)	10,673
Contributions from the federal government
Health and social transfers		3,842		3,840	(2	)	3,701			7,683	7,733		50		7,494
COVID-19 related funding		-		1,378	1,378		-			-	2,618		2,618		-
Other federal government contributions ⁵		909		832	(77	)	788			2,280	2,329		49		2,041
		4,751		6,050	1,299		4,489			9,963	12,680		2,717		9,535
Commercial Crown corporation net income
BC Hydro		13		10	(3	)	25			712	712		-		705
Liquor Distribution Branch		596		613	17		566			1,134	1,127		(7	)	1,107
BC Lottery Corporation ⁶		667		186	(481	)	694			1,363	408		(955	)	1,336
ICBC ⁷		(53	)	383	436		(87	)		86	410		324		(376	)
Other ⁸		72		84	12		74			122	125		3		146
		1,295		1,276	(19	)	1,272			3,417	2,782		(635	)	2,918
Total revenue		30,124		29,144	(980	)	29,089			60,585	57,424		(3,161	)	58,660

Includes provincial sales tax and social services tax/hotel room tax related to prior years.

Columbia River Treaty, other energy and minerals, water rental and other resources.

Healthcare-related, motor vehicle, and other fees.

⁴

Includes reimbursements for health care and other services provided to external agencies, and other recoveries.

⁵

Includes contributions for health, education, community development, housing and social service programs, and transportation projects.

⁶

Net of payments to the federal government.

⁷

Does not include non-controlling interest.

⁸

Includes Columbia Power Corporation, BC Railway Company, Columbia Basin power projects, and post-secondary institutions’ self-supported subsidiaries.

Fall 2020 Economic & Fiscal Update

| 19

Updated 2020/21 Financial Forecast

Table 1.7 2020/21 Expense by Ministry, Program and Agency

	Year-to-Date to September 30												Full Year
	2020/21									Actual			2020/21									Actual
($ millions)	Budget			Actual			Variance			2019/20 ¹			Budget			Forecast			Variance			2019/20
Office of the Premier		6			6			-			7			11			11			-			12
Advanced Education, Skills and Training		1,224			1,135			(89	)		1,221			2,366			2,366			-			2,331
Agriculture		47			57			10			43			95			95			-			112
Attorney General		319			352			33			339			652			652			-			718
Children and Family Development		1,074			886			(188	)		1,004			2,228			2,228			-			2,149
Citizens’ Services		265			290			25			282			552			552			-			596
Education		3,442			3,541			99			3,356			6,697			6,697			-			6,647
Energy, Mines and Petroleum Resources		71			41			(30	)		65			114			114			-			251
Environment and Climate Change Strategy		99			153			54			115			245			257			12			244
Finance		446			526			80			369			838			1,680			842			1,366
Forests, Lands, Natural Resource Operations and Rural Development		358			456			98			472			844			927			83			958
Health		10,892			10,539			(353	)		10,230			22,190			22,190			-			20,825
Indigenous Relations and Reconciliation		46			56			10			80			97			97			-			353
Jobs, Economic Development and Competitiveness		52			44			(8	)		44			93			93			-			98
Labour		8			9			1			8			17			17			-			16
Mental Health and Addictions		5			4			(1	)		3			10			10			-			23
Municipal Affairs and Housing		411			487			76			448			650			650			-			1,182
Public Safety and Solicitor General		421			449			28			430			852			972			120			963
Social Development and Poverty Reduction		1,825			1,821			(4	)		1,759			3,683			3,683			-			3,569
Tourism, Arts and Culture		107			101			(6	)		88			161			161			-			184
Transportation and Infrastructure		464			466			2			462			929			929			-			919
Total ministries and Office of the Premier		21,582			21,419			(163	)		20,825			43,324			44,381			1,057			43,516
Management of public funds and debt		589			635			46			623			1,197			1,265			68			1,234
Contingencies		-			-			-			-			1,066			1,066			-			-
COVID-19 Contingencies - Vote 52 ^2,3		-			1,664			1,664			-			-			7,000			7,000			-
COVID-19 Contingencies - Vote 53 ⁴		-			-			-			-			-			810			810			-
Funding for capital expenditures		877			617			(260	)		534			2,789			2,622			(167	)		1,653
Refundable tax credit transfers		764			1,202			438			732			1,686			2,131			445			1,413
Legislative Assembly and other appropriations		80			75			(5	)		71			166			234			68			150
Total appropriations		23,892			25,612			1,720			22,785			50,228			59,509			9,281			47,966
Elimination of transactions between appropriations ⁵		(5	)		(8	)		(3	)		(10	)		(20	)		(15	)		5			(20	)
Prior year liability adjustments		-			-			-			-			-			-			-			(126	)
Consolidated revenue fund expense		23,887			25,604			1,717			22,775			50,208			59,494			9,286			47,820
Expenses recovered from external entities		1,382			1,451			69			1,725			3,335			4,425			1,090			3,850
Elimination of funding provided to service delivery agencies		(14,816	)		(15,262	)		(446	)		(13,744	)		(30,813	)		(33,260	)		(2,447	)		(28,928	)
Total direct program spending		10,453			11,793			1,340			10,756			22,730			30,659			7,929			22,742
Service delivery agency expense
School districts		3,052			2,970			(82	)		3,038			7,080			7,446			366			6,995
Universities		2,565			2,463			(102	)		2,468			5,457			5,382			(75	)		5,252
Colleges and institutes		703			673			(30	)		681			1,464			1,443			(21	)		1,465
Health authorities and hospital societies		8,723			8,727			4			8,209			17,425			18,791			1,366			17,038
Other service delivery agencies		2,758			2,944			186			2,583			5,902			6,346			444			5,489
Total service delivery agency expense		17,801			17,777			(24	)		16,979			37,328			39,408			2,080			36,239
Total expense		28,254			29,570			1,316			27,735			60,058			70,067			10,009			58,981

Restated to reflect government’s current organization and accounting policies as of September 30, 2020.

On March 23, 2020, the Legislative Assembly passed Supplementary Estimates of $5 billion to establish a new Vote 52 - Contingencies (All Ministries): Pandemic Response and Economic Recovery. An additional $2 billion in appropriation is expected to be tabled in December 2020 to fund further COVID-19 measures.

As of September 30, 2020, COVID-19 spending funded by Vote 52 is as follows (by ministry): $637 million Finance - B.C. Emergency Benefits for Workers; $430 million Social Development and Poverty Reduction; $324 million Children and Family Development; $144 million Education; $64 million Municipal Affairs and Housing; $32 million Health; $28 million Tourism, Arts, and Culture; $5 million Mental Health and Addictions. There is also an additional $61 million spent funded from the base budgets of various ministries; bringing the total Q2 actual COVID-19 spending to $1.725 billion.

⁴

On August 14, 2020, the Legislative Assembly passed Supplementary Estimates No. 2 of $1 billion to establish a new Vote 53 - Contingencies (All Ministries): Federal and Provincial Pandemic Support. The forecast reflects the provincial portion of the federal-provincial cost-shared investments under the Safe Restart Agreement.

⁵

Reflects payments made under an agreement where an expense from a voted appropriation is recorded as revenue by a special account.

20 |

Fall 2020 Economic & Fiscal Update

Updated 2020/21 Financial Forecast

Table 1.8 2020/21 Expense by Function

	Year-to-Date to Sept 30									Full Year
	2020/21							Actual		2020/21							Actual
($ millions)	Budget		Actual		Variance			2019/20		Budget		Forecast		Variance			2019/20
Health:
Medical Services Plan		2,458		2,332		(126	)		2,519		5,275		5,275		-			5,013
Pharmacare		734		731		(3	)		740		1,561		1,561		-			1,517
Regional services		8,793		8,522		(271	)		7,914		16,541		16,695		154			16,047
Other healthcare expenses ¹		56		67		11			379		908		1,064		156			872
		12,041		11,652		(389	)		11,552		24,285		24,595		310			23,449

Education:
Elementary and secondary		3,293		3,074		(219	)		3,294		7,618		7,969		351			7,582
Post-secondary		3,313		3,134		(179	)		3,147		7,125		7,152		27			6,842
Other education expenses ²		252		85		(167	)		75		435		437		2			310
		6,858		6,293		(565	)		6,516		15,178		15,558		380			14,734

Social services:
Social assistance ^1,2		1,163		1,177		14			1,149		2,363		2,441		78			2,342
Child welfare ¹		1,025		849		(176	)		963		2,239		2,241		2			1,940
Low income tax credit transfers		169		659		490			153		352		865		513			435
Community living and other services		620		623		3			586		1,247		1,245		(2	)		1,170
		2,977		3,308		331			2,851		6,201		6,792		591			5,887

Protection of persons and property		886		935		49			905		1,817		1,957		140			2,126
Transportation		997		1,043		46			979		2,228		2,169		(59	)		2,126
Natural resources and economic development		1,390		1,465		75			1,703		3,097		3,067		(30	)		3,778
Other		1,076		968		(108	)		1,112		2,033		2,795		762			2,501
Contingencies		-		-		-			-		1,066		1,066		-			-
COVID-19 Contingencies - Vote 52 ^3,4		-		1,664		1,664			-		-		7,000		7,000			-
COVID-19 Contingencies - Vote 53 ⁵		-		-		-			-		-		810		810			-
General government		716		879		163			784		1,430		1,534		104			1,653
Debt servicing		1,313		1,363		50			1,333		2,723		2,724		1			2,727
Total expense		28,254		29,570		1,316			27,735		60,058		70,067		10,009			58,981

Payments for healthcare services by the Ministry of Social Development and Poverty Reduction the Ministry of Mental Health and Addictions and the Ministry of Children and Family Development made on behalf of their clients are reported in the Health function.

Payments for training costs by the Ministry of Social Development and Poverty Reduction made on behalf of its clients are reported in the Education function.

⁴

As of September 30, 2020, COVID-19 spending funded by Vote 52 is as follows (by function): $430 million in social assistance, $324 million in child welfare $144 million in K-12 education, $37 million in healthcare, $28 million in economic development, $637 million in general government and $64 million in other services.

⁵

Fall 2020 Economic & Fiscal Update

| 21

Updated 2020/21 Financial Forecast

Table 1.9 2020/21 Capital Spending

	Year-to-Date to September 30									Full Year
	2020/21							Actual		2020/21							Actual
($ millions)	Budget		Actual		Variance			2019/20		Budget		Forecast		Variance			2019/20
Taxpayer-supported
Education
School districts		496		483		(13	)		438		994		1,003		9			877
Post-secondary institutions		364		347		(17	)		349		977		959		(18	)		936
Health		567		337		(230	)		307		1,862		1,693		(169	)		1,009
BC Transportation Financing Authority		956		608		(348	)		488		1,870		1,692		(178	)		955
BC Transit		55		55		-			22		184		123		(61	)		73
Government ministries		138		99		(39	)		126		569		535		(34	)		520
Social housing ¹		283		249		(34	)		174		578		676		98			355
Other		33		23		(10	)		17		92		100		8			47
Total taxpayer-supported		2,892		2,201		(691	)		1,921		7,126		6,781		(345	)		4,772

Self-supported
BC Hydro		1,608		1,552		(56	)		1,464		3,092		3,097		5			3,082
Columbia Basin power projects ²		7		2		(5	)		991		14		8		(6	)		994
BC Railway Company		5		1		(4	)		3		10		11		1			6
ICBC		48		47		(1	)		33		116		111		(5	)		62
BC Lottery Corporation		53		18		(35	)		33		105		105		-			102
Liquor Distribution Branch		38		10		(28	)		16		72		33		(39	)		36
Other ³		-		-		-			-		-		-		-			104
Total self-supported		1,759		1,630		(129	)		2,540		3,409		3,365		(44	)		4,386
Total capital spending		4,651		3,831		(820	)		4,461		10,535		10,146		(389	)		9,158

Includes BC Housing Management Commission and Provincial Rental Housing Corporation.

Joint ventures of the Columbia Power Corporation and Columbia Basin Trust.

Includes post-secondary institutions’ self-supported subsidiaries.

22 |

Fall 2020 Economic & Fiscal Update

Updated 2020/21 Financial Forecast

Table 1.10 Capital Expenditure Projects Greater Than $50 million ¹

Note: Information in bold type denotes changes from the 2020/21 First Quarterly Report released on September 10, 2020.


			Project		Estimated		Anticipated		Project Financing
	Year of		Cost to		Cost to		Total		Internal/		P3		Federal		Other
($ millions)	Completion		Sept. 30, 2020		Complete		Cost		Borrowing		Liability		Gov’t		Contrib’ns
	Taxpayer-supported
Schools
Centennial Secondary ²		2021		55		6		61		61		-		-		-
Argyle Secondary		2020		55		7		62		50		-		-		12
Grandview Heights Secondary		2021		56		27		83		63		-		-		20
Handsworth Secondary		2022		20		49		69		69		-		-		-
New Westminster Secondary		2021		82		25		107		107		-		-		-
Burnaby North Secondary		2022		13		95		108		99		-		-		9
Eric Hamber Secondary		2023		11		94		105		93		-		-		12
Stitos Elementary Middle³		2022		14		40		54		49		-		-		5
Sheffield Elementary		2022		5		47		52		47		-		-		5
West Langford Elementary and Middle		2022		13		76		89		89		-		-		-
Victoria High School		2022		7		73		80		77		-		-		3
Quesnel Junior School		2022		3		49		52		52		-		-		-
Cowichan Secondary		2024		3		79		82		80		-		-		2
Seismic mitigation program ⁴		2030		611		933		1,544		1,544		-		-		-
Total schools				948		1,600		2,548		2,480		-		-		68
Post-secondary institutions
Simon Fraser University – Energy Systems Engineering Building ^2,5		2019		124		2		126		45		-		45		36
British Columbia Institute of Technology – Health Sciences Centre for Advanced Simulation		2022		21		67		88		66		-		-		22
Simon Fraser University – Student Housing		2022		10		94		104		73		-		-		31
University of Victoria – Student Housing		2023		29		203		232		128		-		-		104
British Columbia Institute of Technology – Student Housing		2024		-		115		115		109		-		-		6
Total post-secondary institutions				184		481		665		421		-		45		199
Health facilities
Royal Inland Hospital Patient Care Tower
– Direct procurement		2024		13		116		129		39		-		-		90
– P3 contract		2022		159		129		288		-		164		-		124
Vancouver General Hospital – Jim Pattison
Pavilion Operating Rooms		2021		70		32		102		35		-		-		67
Interior Heart and Surgical Centre ²
– Direct procurement		2018		176		72		248		213		-		-		35
– P3 contract		2015		133		-		133		4		79		-		50
Children’s and Women’s Hospital
– Direct procurement		2020		286		22		308		178		-		-		130
– P3 contract		2018		368		-		368		167		187		-		14
Penticton Regional Hospital – Patient Care Tower
– Direct procurement		2022		34		46		80		22		-		-		58
– P3 contract		2019		231		1		232		-		139		-		93
Royal Columbian Hospital – Phase 1		2020		240		19		259		250		-		-		9
Royal Columbian Hospital – Phases 2 & 3		2026		42		1,194		1,236		1,174		-		-		62
Peace Arch Hospital Renewal		2022		25		59		84		8		-		-		76
Red Fish Healing Centre for Mental Health and Addiction - θəqiʔ ɫəwʔənəq leləm		2021		78		53		131		131		-		-		-
Dogwood Complex Residential Care		2022		4		54		58		-		-		-		58
Lions Gate Hospital – New Acute Care Facility		2024		2		253		255		89		-		-		166
St Paul’s Hospital		2026		10		2,073		2,083		1,158		-		-		925
Health facilities continued on the next page

Fall 2020 Economic & Fiscal Update

| 23

Updated 2020/21 Financial Forecast

Table 1.10 Capital Expenditure Projects Greater Than $50 million ¹ (continued)

Note: Information in bold type denotes changes from the 2020/21 First Quarterly Report released on September 10, 2020.


			Project		Estimated		Anticipated		Project Financing
	Year of		Cost to		Cost to		Total		Internal/		P3		Federal		Other
($ millions)	Completion		Sept. 30, 2020		Complete		Cost		Borrowing		Liability		Gov’t		Contrib’ns
Health facilities continued
Mills Memorial Hospital		2026		9		438		447		337		-		-		110
Burnaby Hospital Redevelopment - Phase 1 ⁶		2025		3		574		577		543		-		-		34
Cariboo Memorial Hospital		2026		-		218		218		131		-		-		87
Stuart Lake Hospital		2024		1		115		116		98		-		-		18
Cowichan District Hospital		2026		-		887		887		605		-		-		282
Dawson Creek & District Hospital		2025		-		378		378		247		-		-		131
Clinical and Systems Transformation		2025		457		246		703		702		-		-		1
iHealth Project – Vancouver Island
Health Authority		2025		99		56		155		55		-		-		100
Total health facilities				2,440		7,035		9,475		6,186		569		-		2,720
Transportation
Highway 91 Alex Fraser Bridge Capacity Improvements ²		2019		67		3		70		37		-		33		-
Highway 97 Williams Lake Indian Reserve to Lexington Road ²		2019		57		-		57		57		-		-		-
Highway 1 widening and 216th Street Interchange ²		2020		59		3		62		28		-		22		12
Highway 1 – Admirals Road/McKenzie Avenue Interchange ²		2020		95		1		96		63		-		33		-
Highway 7 Corridor improvements		2020		66		4		70		48		-		22		-
Highway 99 10-Mile Slide		2021		39		21		60		60		-		-		-
Highway 1 Lower Lynn Corridor improvements		2021		153		45		198		77		-		66		55
Highway 1 Illecillewaet Four-Laning and Brake Check improvements		2022		37		48		85		69		-		16		-
Highway 14 Corridor improvements		2022		14		72		86		56		-		30		-
West Fraser Road Realignment		2023		6		97		103		103		-		-		-
Highway 1 Chase Four-Laning		2023		32		228		260		248		-		12		-
Highway 91 to Highway 17 and Deltaport Way Corridor improvements		2023		78		182		260		87		-		82		91
Highway 1 Salmon Arm West		2023		43		142		185		154		-		31		-
Highway 1 RW Bruhn Bridge		2023		22		203		225		134		-		91		-
Pattullo Bridge Replacement ⁷		2023		226		1,151		1,377		1,076		301		-		-
Highway 1 Quartz Creek Bridge Replacement		2023		10		111		121		71		-		50		-
Kootenay Lake ferry service upgrade		2023		2		83		85		68		-		17		-
Highway 1 216th - 264th Street widening		2024		11		224		235		99		-		109		27
Highway 1 Kicking Horse Canyon Phase 4 ⁸		2024		28		573		601		386		-		215		-
Broadway Subway		2025		218		2,609		2,827		1,380		450		897		100
Total transportation				1,263		5,800		7,063		4,301		751		1,726		285
Other taxpayer-supported
Abbotsford courthouse
– Direct procurement		2020		11		7		18		18		-		-		-
– P3 contract		2020		118		16		134		48		80		-		6
Nanaimo Correctional Centre Replacement		2023		4		153		157		157		-		-		-
Stanley New Fountain Hotel (Affordable Rental Housing)		2022		19		50		69		19		-		-		50
6585 Sussex Ave (Affordable Rental Housing)		2021		22		53		75		43		-		-		32
Clark & 1st Ave (Affordable Rental Housing)		2024		3		106		109		75		-		-		34
Royal BC Museum – Collections and Research Building		2024		0		177		177		177		-		-		-
Total other				177		562		739		537		80		-		122
Total taxpayer-supported				5,012		15,478		20,490		13,925		1,400		1,771		3,394

24 |

Fall 2020 Economic & Fiscal Update

Updated 2020/21 Financial Forecast

Table 1.10 Capital Expenditure Projects Greater Than $50 million ¹ (continued)

Note: Information in bold type denotes changes from the 2020/21 First Quarterly Report released on September 10, 2020.


			Project		Estimated		Anticipated		Project Financing
	Year of		Cost to		Cost to		Total		Internal/		P3		Federal		Other
($ millions)	Completion		Sept. 30, 2020		Complete		Cost		Borrowing		Liability		Gov’t		Contrib’ns
Power generation and transmission
BC Hydro
– Horne Payne substation upgrade project ²		2019		70		1		71		71		-		-		-
– John Hart generating station replacement ²		2019		976		3		979		979		-		-		-
– Bridge River 2 units 5 and 6 upgrade project ²		2019		72		2		74		74		-		-		-
– South Fraser transmission relocation project ⁹		TBD		30		46		76		76		-		-		-
– Downtown Vancouver Electricity Supply: West End strategic property purchase		2020		67		14		81		81		-		-		-
– Fort St. John and Taylor Electric Supply		2020		50		3		53		53		-		-		-
– Supply Chain Applications project ²		2020		65		4		69		69		-		-		-
– UBC load increase stage 2 project		2021		45		10		55		55		-		-		-
– Peace Region Electricity Supply (PRES) project ¹⁰		2021		183		102		285		285		-		-		-
– LNG Canada load interconnection project		2021		54		28		82		58		-		-		24
– Bridge River 2 upgrade units 7 and 8 project		2021		38		48		86		86		-		-		-
– Wahleach refurbish generator project		2021		22		29		51		51		-		-		-
– Mica replace units 1 to 4 generator transformers project		2022		36		44		80		80		-		-		-
– G.M. Shrum G1 to 10 control system upgrade		2023		50		25		75		75		-		-		-
– Mount Lehman substation upgrade project		2023		13		46		59		59		-		-		-
– Street light replacement program		2023		3		77		80		80		-		-		-
– 5L063 Telkwa relocation project		2023		12		54		66		66		-		-		-
– Capilano substation upgrade project		2024		9		78		87		87		-		-		-
– Sperling substation (SPG) metalclad switchgear replacement project		2024		3		51		54		54		-		-		-
– Site C project		2024		5,989		4,711		10,700		10,700		-		-		-
Total power generation and transmission				7,787		5,376		13,163		13,139		-		-		24

Other self-supported
Enhanced Care Coverage Program (ICBC)		2022		46		50		96		96		-		-		-
Total self-supported				7,833		5,426		13,259		13,235		-		-		24
Total $50 million projects				12,845		20,904		33,749		27,160		1,400		1,771		3,418

Only projects that receive provincial funding and have been approved by Treasury Board and/or Crown corporation boards are included in this table. Ministry service plans may highlight projects that still require final approval. Capital costs reflect current government accounting policy.

Assets have been put into service and only trailing costs remain.

Previously reported as South Side Area Elementary Middle.

⁴

The Seismic Mitigation Program consists of all spending to date on Phase 2 of the program and may include spending on projects greater than $50 million included in the table above.

⁵

Simon Fraser University and private donors contributed $26 million toward the project, and the university also contributed land valued at $10 million.

⁶

The concept plan for Phase 2 of the Burnaby Hospital Redevelopment has been approved. Financial information will be added to the table upon business case approval.

⁷

Pattullo Bridge forecasted to open to the public in 2023 with old bridge decommissioning to follow. Forecasted amount reflects total expenditures including capitalized and expensed items.

⁸

Kicking Horse Canyon Project costs exclude $11 million of past planning costs which are expensed.

⁹

Construction work on the South Fraser transmission relocation project is currently suspended pending the government's review of the George Massey Tunnel replacement.

¹⁰

The total cost represents the gross cost of the project and has not been netted for Federal Government contributions. The Federal Government's contribution amount is dependent on the final actual project costs and what costs are eligible under the agreement.

Fall 2020 Economic & Fiscal Update

| 25

Updated 2020/21 Financial Forecast

Table 1.11 2020/21 Provincial Debt ¹


	Year-to-Date to Sept 30									Full Year
	2020/21							Actual		2020/21							Actual
($ millions)	Budget		Actual		Variance			2019/20		Budget		Forecast		Variance			2019/20
Taxpayer-supported debt
Provincial government
Operating		-		-		-			-		-		9,201		9,201			-
Liquidity enhancement ²		-		5,338		5,338			-		-		-		-			-
Total provincial government		-		5,338		5,338			-		-		9,201		9,201			-
Other taxpayer-supported debt (mainly capital)
Education ³
Post-secondary institutions		5,615		6,370		755			5,356		5,698		6,109		411			5,670
School districts		9,240		10,699		1,459			8,895		9,437		10,516		1,079			9,775
Total education		14,855		17,069		2,214			14,251		15,135		16,625		1,490			15,445
Health ³		8,440		9,589		1,149			8,058		8,750		9,321		571			8,507
Highways and public transit
BC Transit		91		63		(28	)		68		108		84		(24	)		65
BC Transportation Financing Authority		13,271		12,759		(512	)		11,829		14,195		13,816		(379	)		12,193
Port Mann Bridge		3,510		3,510		-			3,511		3,510		3,510		-			3,510
Public transit		542		870		328			802		542		870		328			870
SkyTrain extension		714		1,021		307			942		714		1,021		307			1,021
Total highways and public transit		18,128		18,223		95			17,152		19,069		19,301		232			17,659
Other
BC Immigrant Investment Fund		38		44		6			58		30		42		12			45
BC Pavilion Corporation		382		377		(5	)		370		385		385		-			378
Provincial government general capital		3,082		3,702		620			2,179		3,584		3,702		118			3,133
Social housing ⁴		1,158		1,426		268			839		2,193		1,907		(286	)		1,027
Other ⁵		42		36		(6	)		32		56		62		6			35
Total other		4,702		5,585		883			3,478		6,248		6,098		(150	)		4,618
Total other taxpayer-supported		46,125		50,466		4,341			42,939		49,202		51,345		2,143			46,229
Total taxpayer-supported debt		46,125		55,804		9,679			42,939		49,202		60,546		11,344			46,229
Self-supported debt
Commercial Crown corporations
BC Hydro		23,795		24,260		465			22,738		24,357		24,363		6			23,238
BC Liquor Distribution Branch		285		209		(76	)		-		273		226		(47	)		210
BC Lottery Corporation ⁶		116		241		125			100		123		280		157			233
Columbia Power Corporation		277		271		(6	)		276		271		271		-			276
Columbia Basin power projects ⁷		1,387		1,358		(29	)		1,397		1,368		1,348		(20	)		1,387
Post-secondary institutions’ subsidiaries		388		497		109			430		388		497		109			504
Other		98		98		-			29		110		95		(15	)		84
Total self-supported debt		26,346		26,934		588			24,970		26,890		27,080		190			25,932
Forecast allowance		-		-		-			-		300		1,000		700			-
Total provincial debt		72,471		82,738		10,267			67,909		76,392		88,626		12,234			72,161

Provincial debt is prepared in accordance with Generally Accepted Accounting Principles and presented consistent with the Debt Summary Report included in the Public Accounts. Debt is shown net of sinking funds and unamortized discounts, excludes accrued interest, and includes non-guaranteed debt directly incurred by commercial Crown corporations and debt guaranteed by the Province.

Liquidity enhancement represents the additional temporary borrowing undertaken during the COVID-19 crisis, beyond operating or capital needs, which is held in cash or cash equivalents.

Includes debt and guarantees incurred by the government on behalf of school districts, universities, colleges, health authorities and hospital societies (SUCH), and debt directly incurred by these entities.

⁴

Includes the BC Housing Management Commission and the Provincial Rental Housing Corporation.

⁵

Includes debt of other service delivery agencies, loan guarantees to agricultural producers, guarantees issued under economic development and home mortgage assistance programs and loan guarantee provisions.

⁶

BC Lottery Corporation budget amounts did not include amounts for lease liabilities related to right of use assets (IFRS 16 Leases). At March 31, 2020, BC Lottery Corporation recorded $53 million in lease liabilities.

⁷

Joint ventures of the Columbia Power Corporation and Columbia Basin Trust.

26 |

Fall 2020 Economic & Fiscal Update

Updated 2020/21 Financial Forecast

Table 1.12 2020/21 Statement of Financial Position

	Actual			Year-to-Date			Forecast
	March 31,			September 30,			March 31,
($ millions)	2020			2020			2021
Financial assets:
Cash and temporary investments		3,985			10,899			4,906
Other financial assets		12,278			14,970			10,373
Sinking funds		692			692			504
Investments in commercial Crown corporations:
Retained earnings		6,515			7,968			8,561
Recoverable capital loans		24,768			25,912			25,807
Total investments in commercial Crown corporations		31,283			33,880			34,368
Total financial assets		48,238			60,441			50,151
Liabilities:
Accounts payable and accrued liabilities		11,497			10,767			12,307
Deferred revenue		10,576			13,429			11,910
Debt:
Taxpayer-supported debt		46,229			55,804			60,546
Self-supported debt		25,932			26,934			27,080
Forecast allowance		-			-			1,000
Total provincial debt		72,161			82,738			88,626
Add: debt offset by sinking funds		692			692			504
Less: guarantees and non-guaranteed debt		(1,337	)		(1,318	)		(1,278	)
Financial statement debt		71,516			82,112			87,852
Total liabilities		93,589			106,308			112,069
Net liabilities		(45,351	)		(45,867	)		(61,918	)
Capital and other non-financial assets:
Tangible capital assets		50,025			51,018			54,236
Other non-financial assets		3,208			3,337			2,826
Total capital and other non-financial assets		53,233			54,355			57,062
Accumulated surplus (deficit)		7,882			8,488			(4,856	)

Changes in Financial Position

	Year-to-Date			Forecast
	September 30,			March 31,
($ millions)	2020			2021
Deficit for the period		426			13,643
Comprehensive income (increase) decrease		(1,032	)		(905	)
Decrease in accumulated surplus		(606	)		12,738

Capital and other non-financial asset changes:
Taxpayer-supported capital investments		2,201			6,781
Less: amortization and other accounting changes		(1,208	)		(2,570	)
Increase in net capital assets		993			4,211
Increase (decrease) in other non-financial assets		129			(382	)
Increase in capital and other non-financial assets		1,122			3,829
Increase in net liabilities		516			16,567

Investment and working capital changes:
Investment in commercial Crown corporations:
Increase in retained earnings		1,453			2,046
Self-supported capital investments		1,630			3,365
Less: loan repayments and other accounting changes		(486	)		(2,326	)
Increase in investment in commercial Crown corporations		2,597			3,085
Increase in cash and temporary investments		6,914			921
Increase (decrease) in other working capital		569			(4,237	)
Increase (decrease) in Investment and working capital		10,080			(231	)

Increase in financial statement debt		10,596			16,336
Decrease in sinking fund debt		-			188
Decrease in guarantees and non-guaranteed debt		(19	)		(59	)
Increase in total provincial debt		10,577			16,465

Fall 2020 Economic & Fiscal Update

| 27

Updated 2020/21 Financial Forecast

Table 1.13 2020/21 Material Assumptions – Revenue

	Budget			First			Fall
Revenue Source and Assumptions	Estimate			Quarter			2020
($ millions unless otherwise specified)	2020/21			Forecast			Update			2020/21 Sensitivities
Personal income tax *		11,771			10,793			10,964
Current calendar year assumptions
Household income growth		3.8	%		-3.3	%		-0.6	%	+/- 1 percentage point change in
Compensation of employees growth		4.0	%		-6.4	%		-3.9	%	2020 B.C. household income growth
Tax base growth		3.8	%		-4.0	%		-0.8	%	equals +/- $100 to $110 million
Average tax yield		5.92	%		5.82	%		5.67	%
Current-year tax		11,289			10,262			10,405
Prior year’s tax assessments		520			520			520
Unapplied taxes		90			100			100
B.C. Tax Reduction		(170	)		(190	)		(190	)
Non-refundable B.C. tax credits		(94	)		(94	)		(94	)
Policy neutral elasticity **		1.2			1.3			1.3		+/- 0.5 change in 2020 B.C.
Fiscal year assumptions										policy neutral elasticity
Prior-year adjustment		-			134			154		equals -/+ $40 to $50 million

2019 Tax-year		2019 Assumptions
Household income growth		4.4	%		4.5	%		6.5	%	+/- 1 percentage point change in 2019
Tax base growth		4.8	%		4.8	%		4.8	%	B.C. household or taxable income
Average 2019 tax yield		5.75	%		5.75	%		5.72	%	growth equals +/- $120 to $140
2019 tax		10,572			10,572			10,572		million one-time effect
2018 & prior year’s tax assessments		510			510			510		(prior-year adjustment)
Unapplied taxes		90			100			100		and could result in an
B.C. Tax Reduction		(166	)		(166	)		(166	)	additional +/- $100 to $120 million
Non-refundable B.C. tax credits		(94	)		(94	)		(110	)	base change in 2020/21
Policy neutral elasticity **		1.3			1.3			0.9
* Reflects information as at October 30, 2020
** Per cent growth in current year tax revenue (excluding policy measures) relative to per cent growth in household income (calendar year).
Corporate income tax *		4,739			3,595			3,673
Components of revenue (fiscal year)
Instalments - subject to general rate		4,600			3,542			3,542
Instalments - subject to small business rate		281			217			217
Non-refundable B.C. tax credits		(145	)		(132	)		(98	)
Advance instalments		4,736			3,627			3,661
Prior-year settlement payment		3			(32	)		12
Current calendar year assumptions
National tax base ($ billions)		365.9			295.4			295.4		+/- 1% change in the 2020
B.C. instalment share of national tax base		14.2	%		14.1	%		14.1	%	national tax base equals
Effective percentage tax rates (% general/small business)		12.0 / 2.0			12.0 / 2.0			12.0 / 2.0		+/- $40 to $50 million
Share of the B.C. tax base subject to the
small business rate		26.9	%		26.9	%		26.9	%	+/- 1 percentage point change in the
B.C. tax base growth (post federal measures)		3.9	%		-7.8	%		-5.7	%	2020 small business share equals
B.C. net operating surplus growth		2.0	%		-18.6	%		-14.2	%	-/+ $40 to $50 million

2019 Tax-year		2019 Assumptions
B.C. tax base growth (post federal measures)		-4.5	%		-4.5	%		-4.5	%
Share of the B.C. tax base subject to
small business rate		27.4	%		27.4	%		27.4	%	+/- 1% change in the 2019 B.C. tax base
B.C. net operating surplus growth		-8.8	%		-6.7	%		-7.0	%	equals +/- $50 to $60 million one-time effect
Gross 2019 tax		4,638			4,638			4,638		(prior-year adjustment) and could result in an
Prior-year settlement payment		3			(32	)		12		additional instalments payments of
Prior years losses/gains (included in above)		(50	)		(100	)		(100	)	+/- $50 to $60 million in 2020/21
Non-refundable B.C. tax creditss		(137	)		(122	)		(78	)

* Reflects information as at October 30, 2020

Cash received from the federal government is used as the basis for estimating revenue. Due to lags in the federal collection and instalment systems, changes to the B.C. net operating surplus and tax base forecasts affect revenue in the succeeding year. The 2020/21 instalments from the federal government reflects two-third of payments related to the 2020 tax year (paid during Apr-July 2020 and adjusted in Sept and Dec) and one-third of 2021 payments.

Instalments for the 2020 (2021) tax year are based on B.C.’s share of the national tax base for the 2019 (2020) tax year and a forecast of the 2020 (2021) national tax base. B.C.’s share of the 2018 national tax base was 14.2%, based on tax assessments as of December 31, 2019. Cash adjustments for any under/over payments from the federal government in respect of 2019 will be received/paid on March 31, 2021.

28 |

Fall 2020 Economic & Fiscal Update

Updated 2020/21 Financial Forecast

Table 1.13 2020/21 Material Assumptions – Revenue (continued)

	Budget			First			Fall
Revenue Source and Assumptions	Estimate			Quarter			2020
($ millions unless otherwise specified)	2020/21			Forecast			Update			2020/21 Sensitivities
Employer health tax		1,924			1,776			1,823
Compensation of employees growth		4.0	%		-6.4	%		-3.9	%	+/- 1 percentage point change in the
										2020 compensation of employees
										growth equals up to +/- $20 million
Provincial sales tax		7,905			6,881			6,746
Provincial sales tax base growth (fiscal year)		3.7	%		-6.8	%		-4.3	%	+/- 1 percentage point change in the
Calendar Year nominal expenditure										2020 consumer expenditure growth
Consumer expenditures on durable goods		1.7	%		-19.5	%		-4.0	%	equals up to +/- $10 million
Consumer expenditures on goods and services		4.5	%		-6.7	%		-5.1	%
Business investment		4.1	%		-10.7	%		-12.5	%
Other		3.2	%		-7.8	%		-7.2	%
Components of Provincial sales tax revenue										+/- 1 percentage point change in the
Consolidated Revenue Fund		7,895			6,871			6,736		2020 business investment growth
BC Transportation Financing Authority		10			10			10		equals up to +/- $5 million
Fuel and carbon taxes		2,978			2,509			2,494
Calendar Year
Real GDP		2.0	%		-6.7	%		-6.2	%
Gasoline volumes		0.0	%		-6.0	%		-3.0	%
Diesel volumes		2.0	%		-4.0	%		-2.0	%
Natural gas volumes		2.0	%		-12.0	%		-5.0	%
Carbon tax rates (April 1)
Carbon dioxide equivalent emissions ($/tonne)		45			40			40
Natural gas (cents/gigajoule)		223.470	¢		198.640	¢		198.640	¢
Gasoline (cents/litre)		9.960	¢		8.890	¢		8.890	¢
Light fuel oil (cents/litre)		11.710	¢		10.230	¢		10.230	¢

Components of revenue
Consolidated Revenue Fund		543			501			501
BC Transit		20			18			18
BC Transportation Financing Authority		461			430			415
Fuel tax revenue		1,024			949			934
Carbon tax revenue		1,954			1,560			1,560
Property taxes		3,026			2,332			2,339
Calendar Year
Consumer Price Index		2.2	%		0.9	%		0.7	%	+/- 1 percentage point change in
Housing starts (units)		35,021			34,000			35,499		2020 new construction & inflation
Home owner grants (fiscal year)		848			870			870		growth equals up to +/- $20 million in
Components of revenue										residential property taxation revenue
Residential (net of home owner grants)		1,170			1,134			1,132
Speculation and vacancy		185			80			80
Non-residential		1,334			762			792		+/- 1% change in 2020 total
Rural area		125			129			129		business property assessment
Police		34			37			37		value equals up to +/- $10 million
BC Assessment Authority		96			99			99		in non-residential property
BC Transit		82			91			70		taxation revenue
Other taxes		3,001			2,706			3,195
Calendar Year
Population		1.4	%		1.4	%		1.1	%
Residential sales value		4.6	%		-9.6	%		15.4	%
Real GDP		2.0	%		-6.7	%		-6.2	%
Nominal GDP		3.9	%		-6.5	%		-6.0	%
Components of revenue										+/- 1% change to 2020 residential
Property transfer		1,586			1,271			1,750		sales value equals +/- $20 million
Additional Property Transfer Tax (included in above)		123			109			100		in property transfer revenue,
Tobacco		755			730			740		depending on property values
Insurance premium		660			705			705

Fall 2020 Economic & Fiscal Update

| 29

Updated 2020/21 Financial Forecast

Table 1.13 2020/21 Material Assumptions – Revenue (continued)

	Budget			First			Fall
Revenue Source and Assumptions	Estimate			Quarter			2020
($ millions unless otherwise specified)	2020/21			Forecast			Update			2020/21 Sensitivities
Energy, sales of Crown land tenures,
metals, minerals and other *		838			571			634
Natural gas price										+/- $0.25 change in the natural gas
Plant inlet, $C/gigajoule		0.62			0.86			1.08		price equals +/- $40 to $70 million,
Sumas, $US/MMBtu		1.96			1.55			2.18		including impacts on production
Natural gas production volumes										volumes and royalty program
Billions of cubic metres		56.3			53.3			56.0		credits, but excluding any
Petajoules		2,343			2,218			2,329		changes from natural gas liquids
Annual per cent change		7.1	%		-1.0	%		4.0	%	revenue (e.g. butane, pentanes)
										Sensitivities can also vary
Oil price ($US/bbl at Cushing, OK)		61.13			37.40			38.46		significantly at different price levels
										+/- 1% change in natural gas
Auctioned land base (000 hectares)		25			-			-		volumes equals +/- $2 million
Average bid price/hectare ($)		350			-			-		in natural gas royalties
Cash sales of Crown land tenures		9			-			-		+/- 1 cent change in the
Metallurgical coal price ($US/tonne, fob Australia)		155			127			125		exchange rate equals +/- less than
Copper price ($US/lb)		2.81			2.62			2.75		$1 million in natural gas royalties

Annual electricity volumes set by treaty		3.8			3.8			3.8		+/- $10/bbl change in petroleum price
(million mega-watt hours)										equals +/- $7 million in petroleum royalties
Mid-Columbia electricity price		33.93			26.45			31.90		+/- 27% change in natural gas liquids
($US/mega-watt hour)										(equivalent to +/- $10/bbl oil price) prices
										equals +/- $25 to $30 million in natural gas
Exchange rate (US0/C$, calendar year)		76.3			73.3			74.2		liquids royalties
Components of revenue
Bonus bid auctions:										+/- US$20 change in the average
Deferred revenue		115			115			115		metallurgical coal price
Current-year cash (one-tenth)		1			-			-		equals +/- $40 to $70 million
Fees and rentals		52			50			50		+/- 10% change in the average
Total bonus bids, fees and rentals		168			165			165		Mid-Columbia electricity price
Natural gas royalties after deductions and allowances		207			94			147		equals +/- $15 million
Petroleum royalties		44			18			19
Columbia River Treaty electricity sales		153			119			144		Based on a recommendation
Oil and Gas Commission fees and levies		72			65			67		from the Auditor General to be
Coal, metals and other minerals revenue:										consistent with generally
Coal tenures		8			8			8		accepted accounting principles,
Net coal mineral tax		90			19			-		bonus bid revenue recognition
Net metals and other minerals tax		41			28			29		reflects ten-year deferral of
Recoveries relating to revenue sharing payments										cash receipts from the sale of
to Fist Nations		38			38			38		Crown land tenures
Miscellaneous mining revenue		17			17			17
Total coal, metals and other minerals revenue		194			110			92

Gross royalties prior to deductions and allowances
Gross natural gas revenue		170			215			356
Gross natural gas liquids royalties revenue		510			308			317

Royalty programs and infrastructure credits
Deep drilling		(267	)		(243	)		(332	)
Road, pipeline, Clean Growth Infrastructure Royalty
and other infrastructure programs		(76	)		(76	)		(70	)
Total		(343	)		(319	)		(402	)
Implicit average natural gas royalty rate		14.3	%		5.0	%		5.9	%

Royalty program (marginal, low productivity and ultra marginal drilling) adjustments reflect reduced royalty rates.

Natural gas royalties incorporate royalty programs and Treasury Board approved infrastructure credits.

* Reflects information as at October 30, 2020.

30 |

Fall 2020 Economic & Fiscal Update

Updated 2020/21 Financial Forecast

Table 1.13 2020/21 Material Assumptions – Revenue (continued)

	Budget			First			Fall
Revenue Source and Assumptions	Estimate			Quarter			2020
($ millions unless otherwise specified)	2020/21			Forecast			Update			2020/21 Sensitivities
Forests *		867			897			993
Prices (calendar year average)										+/- US$50 change in SPF
SPF 2x4 ($US/thousand board feet)		380			410			520		price equals +/- $125 to $175 million
Pulp ($US/tonne)		815			834			834		+/- US$50 change in pulp price
Coastal log ($Cdn/cubic metre);										equals +/-$5 to $10 million
Vancouver Log Market		120			137			137		+/- Cdn$10 change in average
										log price equals +/-$10 to
Crown harvest volumes (million cubic metres)										$20 million
Interior		35.0			33.5			33.5		+/- 10% change in Interior
Coast		11.0			10.5			10.5		harvest volumes equals
Total		46.0			44.0			44.0		+/- $70 to $80 million
B.C. Timber Sales (included in above)		10.5			10.5			10.5		+/- 10% change in Coastal
										harvest volumes equals
Stumpage rates ($Cdn/cubic metre)										+/- $15 to $25 million
Total stumpage rates		16.83			18.52			21.07		+/- 1 cent change in
										exchange rate equals
Components of revenue										+/- $20 to $25 million in
Timber tenures (net of revenue sharing recoveries)		394			438			550		stumpage revenue
Recoveries relating to revenue sharing payments
to First Nations		40			40			40
B.C. Timber Sales		361			362			361		The above sensitivities relate
Logging tax		30			15			-		to stumpage revenue only.
Other CRF revenue		21			21			21
Recoveries		21			21			21
* Reflects information as at October 30, 2020

Other natural resources		444			437			434
Components of revenue
Water rental and licences*		375			368			366		+/- 5% change in water
Recoveries		46			46			46		power production equals
Angling and hunting permits and licences		10			10			9		+/- $15 million
Recoveries		13			13			13
* Water rentals for power purposes are indexed to Consumer Price Index.

Total natural resource recoveries relating to										Revenue sharing from natural gas royalties,
revenue sharing payments to First Nations		80			80			80		mineral tax and forest stumpage revenues.

Other revenue		9,712			8,715			8,667
Components of revenue
Fees and licences
Motor vehicle licences and permits		586			571			568
International student health fees		70			40			74
Other Consolidated Revenue Fund		447			444			437
Summary consolidation eliminations		(16	)		(14	)		(14	)
Ministry vote recoveries		110			110			110
Taxpayer-supported Crown corporations		149			125			130
Post-secondary education fees		2,578			2,223			2,304
Other healthcare-related fees		439			446			415
School Districts		304			174			174
Investment earnings
Consolidated Revenue Fund		108			110			113
Fiscal agency loans & sinking funds earnings		926			886			898
Summary consolidation eliminations		(47	)		(42	)		(42	)
Taxpayer-supported Crown corporations		36			33			36
SUCH sector agencies		224			224			223
Sales of goods and services
SUCH sector agencies		935			606			586
BC Infrastructure Benefits Inc		73			67			12
Other taxpayer-supported Crown corporations		227			156			156
Miscellaneous		2,563			2,556			2,487

Fall 2020 Economic & Fiscal Update

| 31

Updated 2020/21 Financial Forecast

Table 1.13 2020/21 Material Assumptions – Revenue (continued)

	Budget			First			Fall
Revenue Source and Assumptions	Estimate			Quarter			2020
($ millions unless otherwise specified)	2020/21			Forecast			Update			2020/21 Sensitivities
Health and social transfers		7,683			7,681			7,733
National Cash Transfers
Canada Health Transfer (CHT)		41,870			41,870			41,870
Annual growth		3.7	%		3.7	%		3.7	%
Canada Social Transfer (CST)		15,023			15,023			15,023
B.C.’s share of national population (June 1)		13.503	%		13.501	%		13.55	%	+/- 0.1 percentage point change in
										B.C.’s population share equals
B.C. health and social transfers revenue										+/- $57 million
CHT		5,654			5,653			5,671
CST		2,029			2,028			2,035
Prior-year adjustments:
CHT								20
CST								7

Other federal contributions		2,280			4,636			4,947
Components of revenue
COVID-19 related funding:
Safe Restart Agreement					1,963			1,963
COVID-19 Essential Workers Support Fund					371			371
Safe Return to Class Fund								242
Financial Assistance Agreement to Support Closure
and Restoration of Oil and Gas
Sites in British Columbia					42			42
Total		—			2,376			2,618
Disaster Financial Assistance Arrangements		80			68			142
B.C.’s share of the federal cannabis excise tax		50			25			34
Low Carbon Economy Leadership Fund		16			16			16
Other Consolidated Revenue Fund		145			152			151
Vote Recoveries:
Labour Market Development Agreement		329			329			329
Labour Market and Skills Training Program		124			124			124
Home Care		88			88			88
Mental Health		81			81			81
Low Carbon Economy Leadership Fund		15			15			15
Early Childhood Development and
Child Care Services		41			41			41
Child Safety, Family Support, Children
in Care and with special needs		75			75			75
Policing and Security		9			9			9
Public Transit		46			46			46
Local government services and transfers		159			159			159
Other recoveries		125			125			125
Taxpayer-supported Crown corporations		260			284			271
Post-secondary institutions	��	525			509			509
Other SUCH sector agencies		112			114			114

Service delivery agency direct revenue		8,182			7,223			7,614
School districts		724			587			562
Post-secondary institutions		4,480			3,791			3,857
Health authorities and hospital societies		1,214			1,238			1,205
BC Transportation Financing Authority		565			548			499
Other service delivery agencies		1,199			1,059			1,013

32 |

Fall 2020 Economic & Fiscal Update

Updated 2020/21 Financial Forecast

Table 1.13 2020/21 Material Assumptions – Revenue (continued)

	Budget			First			Fall
Revenue Source and Assumptions	Estimate			Quarter			2020
($ millions unless otherwise specified)	2020/21			Forecast			Update			2020/21 Sensitivities
Commercial Crown corporation net income		3,417			2,484			2,782
BC Hydro		712			712			712
Reservoir water inflows		100	%		106	%		108	%	+/-1% in hydro generation
										equals +/-$5 million
Mean gas price		2.16			2.38			2.49		+/-10% equals +/-$0.4 million
(Sumas, $US/MMbtu – BC Hydro forecast based on NYMEX forward selling prices)
Electricity prices		27.67			24.08			23.27		+/-10% change in electricity trade
(Mid-C, $US/MWh)										margins equals +/-$20 million

ICBC		86			86			410
Vehicle growth		+1.3	%		-1.1	%		-0.5	%	+/-1% equals +/-$63 million
Current claims cost percentage change		+13.4	%		2.6	%		+3.6%		+/-1% equals -/+$51 million
Unpaid claims balance ($ billions)		16.1			15.7			16.0		+/-1% equals -/+$160 to $160 million
Investment return		2.5	%		2.1	%		2.9	%	+/-1% return equals +/-$184 to $204 million
Loss ratio		89.0	%		82.2	%		85.1	%

Fall 2020 Economic & Fiscal Update

| 33

Updated 2020/21 Financial Forecast

Table 1.14 2020/21 Material Assumptions – Expense

	Budget	First	Fall
Ministry Programs and Assumptions	Estimate	Quarter	2020
($ millions unless otherwise specified)	2020/21	Forecast	Update	2020/21 Sensitivities
Advanced Education, Skills and Training	2,366	2,366	2,366
Student spaces in public institutions	203,575	203,575	203,575	Student enrolments may fluctuate due to a number of factors including economic changes, labour market needs and impact of COVID-related changes to delivery models and institutional protocols. Current year forecast to be updated at Q3 to align with PSI reporting, consistent with past practice.
Attorney General	652	652	652
New cases filed/processed (# for all courts)	240,000	240,000	240,000	The number of criminal cases proceeded on by the provincial and federal Crown (including appeals to higher courts in BC), the number of civil and family litigation cases, the number of violation tickets disputed, and the number of municipal bylaw tickets disputed which would go to court for resolution.
Crown Proceeding Act (CPA)	25	25	25	The number of new cases, and the difference between estimated settlements and actual settlements.
Children and Family Development	2,228	2,228	2,228
Average children-in-care caseload (#)	5,912	5,912	5,538	The average number of children-in-care is decreasing as a result of ministry efforts to keep children in family settings where safe and feasible. The average cost per child in care is projected to increase based on the higher cost of contracted residential services and an increasing acuity of need for children in care. A 1% increase in the cost per case or a 1% increase in the average caseload will affect expenditures by $2.4 million (excluding Delegated Aboriginal Agencies).
Average annual residential cost per child in care ($)	83,211	83,211	83,874
Education	6,697	6,697	6,697
Public School Enrolment (# of FTEs)	570,113	569,992	569,992	Updated forecast enrolment figures are based on submissions from school districts of their actual enrolment as at September 30, 2019 for the 2019/20 school year and projected enrolment for February and May 2020 for Distributed Learning and Adults. Projections for 2020/21 to 2022/23 are based on the Ministry of Education’s enrolment forecasting model.
School age (K-12)	547,661	547,540	547,540
Continuing Education	1,115	1,115	1,115
Distributed Learning (online)	11,177	11,177	11,177
Summer	7,279	7,279	7,279
Adults	2,881	2,881	2,881
Forests, Lands, Natural Resource Operations and Rural Development	844	920	927
BC Timber Sales	219	219	224	Targets can be impacted by changes to actual inventory costs incurred. There is a lag of approximately 1.5 years between when inventory costs are incurred and when they are expensed. Volume harvested can also impact targets. For example, if volume harvested is less than projected in any year, then capitalized expenses will also be reduced in that year.
Fire Management	136	212	214	Costs are driven by length of season and severity of weather conditions, severity of fires, proportion of interface fires, size of fires and damaged caused.
Health	22,190	22,190	22,190
Pharmacare	1,411	1,411	1,411	A 1% change in utilization or prices affects costs by approximately $12 million.
Medical Services Plan (MSP)	5,243	5,243	5,243	A 1% increase in volume of services provided by fee-for-service physicians affects costs by approximately $30 million.
Regional Services	15,233	15,233	15,233

34 |

Fall 2020 Economic & Fiscal Update

Updated 2020/21 Financial Forecast

Table 1.14 2020/21 Material Assumptions – Expense (continued)

	Budget		First	Fall
Ministry Programs and Assumptions	Estimate		Quarter	2020
($ millions unless otherwise specified)	2020/21		Forecast	Update	2020/21 Sensitivities
Public Safety and Solicitor General		852	946	972
Policing, Victim Services and Corrections		702	702	702	Policing, Victim Services and Corrections costs are sensitive to the volume and severity of criminal activity, the number of inmate beds occupied and the number of offenders under community supervision.
Emergency Program Act (EPA)		37	131	157	For authorized expenditures under the EPA, including those for further disasters, and the difference between initial estimates for disaster response and recovery costs and final project costs. In 2020/21, the projected EPA expenditures are based on forecasts as of September 30, 2020.
Social Development and Poverty Reduction		3,683	3,683	3,683
Temporary Assistance annual average caseload (#)		43,900	63,596	43,167	The expected to work caseload is sensitive to fluctuations in economic and employment trends. Costs are driven by changes to cost per case and caseload. Cost per case fluctuations result from changes in the needed supports required by clients, as well as caseload composition.

Disability Assistance annual average caseload (#)		112,700	116,005	115,003	The caseload for persons with disabilities is sensitive to the aging of the population and longer life expectancy for individuals with disabilities. Cost per case fluctuations are driven primarily by earnings exemptions which is dependent on the level of income earned by clients.

Adult Community Living:
Developmental Disabilities Programs
Average caseload (#)		21,630	21,620	21,590	The adult community living caseload is sensitive to an aging population and to the level of service required. Cost per case fluctuations are driven by the proportion of clients receiving certain types of services at differing costs. For example, residential care services are significantly more costly than day programs.
Average cost per client ($)		48,400	51,900	52,000
Personal Supports Initiative (PSI)
Average caseload (#)		2,360	2,390	2,370
Average cost per client ($)		15,400	16,100	16,000

Fall 2020 Economic & Fiscal Update

| 35

Updated 2020/21 Financial Forecast

Table 1.14 2020/21 Material Assumptions – Expense (continued)

	Budget	First	Fall
Ministry Programs and Assumptions	Estimate	Quarter	2020
($ millions unless otherwise specified)	2020/21	Forecast	Update		2020/21 Sensitivities
Tax Transfers	1,686	2,100	2,131
Individuals	702.0	1,217.0	1,227.0
Climate Action Tax Credit	302.0	802.0	802.0		These tax transfers are now expensed as required under generally accepted accounting principles.
BC Child Opportunity Benefit	255.0	255.0	255.0
Sales Tax	50.0	65.0	63.5
Small Business Venture Capital	30.0	30.0	30.0
BC Senior’s Home Renovation	2.0	2.0	3.8		Changes in 2019 tax transfers will result in one-time effect (prior-year adjustment) and could result in an additional base change in 2020/21. Production services tax credit is the most volatile of all tax transfers and is influenced by several factors including delay in filing returns and assessment of claims, length of projects and changes in the exchange rates.
Other tax transfers to individuals	63.0	63.0	72.7

Corporations	984.0	883.0	904.0
Film and Television	100.0	97.5	152.5
Production Services	695.3	542.7	500.3
Scientific Research & Experimental
Development	76.0	119.8	121.3
Interactive Digital Media	70.0	70.0	92.5
Mining Exploration	20.0	30.0	30.0
Other tax transfers to corporations	22.7	23.0	7.4

Prior-year adjustment (included above)*	-	16.0	6.1
Individuals	-	-	7.1
Corporations	-	16.0	(1.0	)

2019 Tax-year	2019 Assumptions
Tax Transfers	1,434.0	1,465.0	1,443.0
Individuals	527.0	527.0	534.0
Corporations	907.0	938.0	909.0
Film and Television	100.0	110.0	140.0
Production Services	624.0	610.0	550.0
Scientific Research & Experimental
Development	70.0	90.0	90.0
Interactive Digital Media	70.0	75.0	85.0
Other tax transfers to corporations	43.0	53.0	44.0

*2020/21 tax transfer forecast incorporates adjustments relating to prior years.

Management of Public Funds and Debt	1,197		1,280		1,265
Interest rates for new provincial borrowing:							Full year impact on MoPD on interest costs of a 1% change in interest rates equals $42.5 million; $100 million increase in debt level equals $1.7 million.
Short-term	1.52	%	0.32	%	0.24	%
Long-term	2.69	%	2.17	%	2.13	%
CDN/US exchange rate (cents)	131.4		136.6		134.2
Service delivery agency net spending	8,029		7,684		7,522
School districts	576		502		505		Expenses, net of Provincial funding. These are mainly funded through revenue from other sources.
Post-secondary institutions	4,233		4,086		4,060
Health authorities and hospital societies	963		990		958
BC Transportation Financing Authority	1,444		1,398		1,383
BC Infrastructure Benefits Inc	73		68		13
Other service delivery agencies	740		640		603

36 |

Fall 2020 Economic & Fiscal Update

APPENDIX | DESCRIPTION OF COVID-19 MEASURES

Appendix: Description of COVID-19 Measures

Vote 52 Pandemic Contingencies Spending Measures as of November 30, 2020 ¹

Health care (over $1.3 billion): Funding related to health related COVID-19 response measures includes:

Increased lab testing, including the establishment of over 80 separate testing sites to help avoid the transmission of COVID-19 within existing health care settings;

Additional funding for long-term care and assisted living facilities, including addressing increased COVID-19 related costs, implementing single-site work orders to help prevent the spread of disease between facilities, and hiring of up to three full-time equivalent staff at each of the 584 facilities;

Prevention and contact tracing measures, including plans to hire 500 contact tracers between September 2020 and March 2021 to help with the projected rise in cases of COVID-19;

Health related costs wrap-around support services for those that were living in unsafe decampments who have been moved to temporary housing;

Free parking at health authority sites to remove barriers to anyone who needed access and reduce the burden on health care workers; and

Other increased operating costs including personal protective equipment, accelerating rescheduled surgeries, and increased staffing across the health spectrum including general screening staff at health facility entrances to specialist physicians and nurses, and staff within the BC Center for Disease Control.

Mental health and addictions support ($35 million): Funding includes mental health supports such as expanded virtual mental health supports including free online, video and phone-based skills-building for seniors, adults and youth and a Mobile Response Team to support the mental well-being and psychological safety of front-line health-care workers. In addition, this includes a number of addiction support services such as:

Opioid response and addictions supports including funding for supportive recovery providers and youth substance use treatment services;

Youth supports provided through Foundry and Foundry Virtual which offers health and wellness resources, services and supports online and through integrated service centres;

Scaling up existing overdose prevention services and adding new outreach teams to further help prevent overdose deaths including opening 17 new supervised consumption services and 12 new inhalation services in communities that have been hit the hardest by the overdose crisis;

Funding to hire 42 new full-time registered nurses, psychiatric nurses, social workers and peer support workers for 14 interdisciplinary outreach teams across the province;

¹These allocations do not include additional supplementary estimates tabled in the Legislative Assembly in December 2020.

Fall 2020 Economic & Fiscal Update

| 37

Appendix – Description of COVID-19 Measures

The Lifeguard application, which supports individuals with addictions with a means to call emergency services if they become unresponsive while using substances;

Establishing the Rapid Access to Consultative Expertise Line to connect first responders treating patients with substance use disorders with overdose health emergencies physicians; and

Funding to create 6 new Assertive Community Treatment (ACT) teams, who use a psychosocial rehabilitation approach for individuals with severe and complex mental illness, with or without substance use or addiction.

Child care services ($319 million): Temporary emergency funding that was provided from April to August to ensure child care spaces remained available for essential service workers and to provide financial relief and preserve spaces for parents during any temporary closures. Licensed child care providers that stayed open received funding to keep operations going. These centres were eligible to receive seven times their average monthly funding from government which is expected to cover approximately 75 per cent of a group facility’s average monthly operating expenses. Licensed child care providers who closed their facilities were eligible to receive two times their average monthly government funding which is expected to cover approximately 20 per cent of an average group facility’s monthly operating expenses.

Temporary housing, meal and health supports for vulnerable populations ($158 million): Spaces at hotels, motels and community centres are providing shelter to assist a range of people, including people experiencing homelessness, to self-isolate and follow health orders as well as receive food and support services. In addition to funding for these supports, the province has made capital investments (approximately $111 million) to purchase hotels to help move people living in unsafe, dense encampments at Oppenheimer Park, Pandora Avenue and Topaz Park into safe spaces. Nearly 3,000 leased spaces are currently secured at sites throughout B.C.’s health regions to enable safe physical distancing in homeless shelters and help people self-isolate, with close to 200 spaces in communities secured for people leaving violent or unstable situations.

Essential services for adults with developmental disabilities and for vulnerable children and youth ($53 million): Funding to ensure continuity of services for adults with developmental disabilities receiving care from Community Living BC. Funding also supports a range of supports for children and youth that access provincial supports including $225 per month for eligible B.C. families with children with special needs that ended September 30, 2020. Continuing existing care-giver arrangements for youth aging out of foster care and extend the maximum duration of Agreements with Young Adults program beyond 48 months is also being funded. Other essential service supports include funding to facilitate virtual court proceedings and accelerate the resolution of family law matters, supports for victim services, and COVID-19 related public awareness campaigns to communicate health and safety information.

B.C. Emergency Benefit for Workers ($900 million): Provides a one-time, tax-free $1,000 payment to British Columbians who are losing income because of COVID-19. B.C. residents who lost their employment or self-employment income for reasons related to COVID-19 on or after March 1 and that are eligible for the Canada Emergency Response Benefit (CERB) are eligible for the B.C. Emergency Benefit for Workers (BCEBW). Over 636,600 British Columbians to date have received the BCEBW.

38 |

Fall 2020 Economic & Fiscal Update

Appendix – Description of COVID-19 Measures

Crisis Supplement and Supports for Income and Disability Assistance Clients ($624 million): Temporary supplement of $300 per month for income and disability assistance clients, including low-income seniors receiving the Seniors Supplement, from April through December. This new emergency funding was put in place to ensure that those in greatest need do not encounter additional barriers while some service organizations closed or reduced service hours during the pandemic, and to help cover the increased costs of food and shelter. Over 200,000 people, including clients and their families, have benefited from the crisis supplement. Other measures include increased funding for the transportation supplement and temporary earning exemptions related to federal support measures such as the Canada Emergency Response Benefit (CERB) to ensure that provincial supports are not reduced due to these supports.

Temporary Rental Supplement ($129 million): A new temporary rental supplement of $500 per month for eligible households with dependents and $300 per month for eligible households with no dependents, which was available for the months of April through to August on a per-household basis for low-to-middle income households where the income has been affected by COVID-19. Over 81,000 applications have been approved for the supplement to date.

Emergency financial relief for businesses/sectors (over $64 million): Targeted funding to support businesses, non-profit organizations and sectors which includes:

Emergency funding to support the continued care of animals in major facilities, tourism attractions, and refuge and re-habitation centres that have reduced their operations due to COVID-19;

Financial relief and recovery for the agriculture sector, as well as temporary accommodations for domestic migrant farm workers to support self-isolation and reduce the spread of COVID-19;

Support for park operators to prepare BC Parks for re-opening and to implement a day use reservation system for 12 high-use parks;

Financial relief to Community Destination Marketing Organizations to offset Municipal Regional District Tax (MRDT) revenue loss and to support local recovery efforts;

Support for the domestic film and television industry to assist with restart and recovery and maintain B.C.’s competitive motion picture sector;

Financial relief to Local Sport Organizations (LSOs) to support their administration and operational needs to help restart in sports; and

Financial relief for BC Pavilion Corporation to maintain operations during prolonged closures of major events.

Canada Emergency Commercial Rent Assistance Program ($20 million provincial contribution): This was a federal-provincial cost share program that provided forgivable loans to qualifying commercial property owners to cover 50 per cent of monthly rent payments that are payable by eligible small business tenants who experienced financial hardship between April and September. The loans were forgiven if the mortgaged property owner agreed to reduce the small business tenants’ rent by at least 75 per cent under a rent forgiveness agreement, which included a term not to evict the tenant while the agreement is in place. The small business tenant covered the remainder, up to 25 per cent of the rent. The federal government has subsequently introduced a new Canada Emergency Rent Subsidy program.

Fall 2020 Economic & Fiscal Update

| 39

Appendix – Description of COVID-19 Measures

Vote 52 Pandemic Contingencies: Economic Recovery Spending Measures

Recovery for People – Jobs and Training ($417 million): Includes economic recovery measures that support job creation and more training and retraining programs to help people upskill and be ready and qualified for new jobs. New investments include $300 million specifically to create 5,800 new positions in healthcare including contact tracers, screening staff at long-term or assisted living facilities, and other health sector capacity growth. The remainder of the funding is targeted at various skills training for different populations and sectors experiencing the greatest job loss due to the pandemic, as well as job creation projects in communities, parks and forestry.

Recovery for People – Supports ($52 million): Funding to support and ensure the health and safety of students and staff in the K-12 education sector, including school districts and independent schools, to restart in the fall. This investment will ensure the increased cleaning of high-contact surfaces, increased number of hand-hygiene stations and the availability of masks upon request, among other safety measures. Other recovery supports for people include programs to address mental health in the workplace through improved skills and processes for addressing mental health, and anti-racism and suicide prevention programs to support youth and Indigenous people.

Recovery for Businesses ($405 million): Includes targeted supports for businesses including a new, $300 million recovery grant program for small and medium businesses. This grant program will provide funding to businesses who are able to demonstrate a viable plan to adapt to the new conditions but require investment to do so. There is also just over $80 million for tourism sector specific recovery initiatives, including funding for tourism dependant communities, developing regional tourism initiatives and a tourism task force. The new Tourism Task Force will bring together leaders from business, labour, First Nations and not-for-profits to seek innovative and creative ideas on how the tourism in B.C. can be well positioned for a 2021 tourism season and ideas on envisioning a sustainable future. The Tourism Task Force has been allocated $50 million to support implementation of their recommendations.

Recovery for Communities – Community Infrastructure ($303 million):

These investments are in communities throughout the province to provide funding for local governments to partner with the federal government, invest in climate change and CleanBC initiatives, and enhance infrastructure. As part of the plan, the Province will invest $100 million in infrastructure grants for shovel-ready projects in a new Community Economic Recovery Infrastructure Program, including:

$30 million stream for community economic resilience;

$20 million to develop tourism infrastructure to help communities attract visitors;

$10 million to create, enhance and/or rehabilitate outdoor play spaces;

$20 million to support economic recovery for rural communities; and

$20 million unique heritage infrastructure and Indigenous cultural heritage.

The government will also continue to work closely with federal partners by investing $27 million over the next three years to cost-match federal funding available under the Investing in Canada Infrastructure Program.

40 |

Fall 2020 Economic & Fiscal Update

Appendix – Description of COVID-19 Measures

Recovery for Communities – Social Supports ($67 million): The Province is providing grants to support childcare health and safety and to support an arts and culture resiliency plan. The child care funding will ensure child care providers remain viable and ready to support children and parents as the province is reopened, as well as speed up the plan to open 1,200 more affordable child care spaces in B.C. The arts and culture resiliency program, aligned with other tourism industry measures, aims to support organizations by providing the liquidity required to remain viable despite significant revenue losses due to the pandemic and to support them to be positioned for success when travel restrictions are lifted.

Building for a Better Future – Food Security and Farming ($25 million): As part of the economic recovery envelope, the government is investing over $25 million to strengthen food security and supply chains to develop greater capacity to mitigate the risks of the pandemic and to build a more resilient economy. Funding will support initiatives to create 6 new food hubs throughout the province; support agritech companies to support agriculture innovation; provide support to farmers and food production and processing; and to detect and remove invasive species.

Building for a Better Future – Self-Resilience ($232 million): To improve economic resiliency in B.C., the government is investing $232 million to improve connectivity, clean energy, manufacturing and forestry. This includes:

$90 million to increase connectivity in rural communities and to improve wi-fi and cellular connectivity along major highways and at key rest stops;

$96 million for clean energy – to establish a new centre for clean energy and growth, provide incentives for electric vehicles programs and provide investment for commercial vehicle innovation;

$14 million for value-added manufacturing – to provide grants of up to $50,000 to support small and medium-sized companies build manufacturing capacity, generate new economic opportunities and enhance supply chain resilience; and

$32 million for other stimulus programs aimed at modernizing B.C. and increasing self resilience.

Vote 52 Supplementary Estimates – December 2020

BC Recovery Benefit ($1.7 billion): the BC Recovery Benefit is a one-time payment of up to $1,000 for families with household incomes under $175,000 annually and up to $500 to single people earning less than $87,500 annually. The benefit is anticipated to help up to 2.7 million individuals and families, including those in receipt of income and disability assistance. British Columbians will be able to apply for the benefit starting December 18, 2020.

BC Recovery Supplement ($110 million): the BC Recovery Supplement provides a $150 per month top-up to income and disability assistance clients, including low-income seniors on the Seniors Supplement for the period of January - March 2021. When combined with the BC Recovery Benefit, income and disability assistance clients will receive benefits totalling $950 for individuals and $1,450 for families over the next three months.

Fall 2020 Economic & Fiscal Update

| 41

Appendix – Description of COVID-19 Measures

Increased Employment Incentive ($190 million): the Increased Employment Incentive is a new refundable tax credit to employers who increase their total payroll for B.C. employees from the third to the fourth quarter of 2020. The incentive is intended to help B.C. businesses that were affected by the COVID-19 pandemic to recover and help create good jobs for people. Employers can increase their payroll by hiring new employees, increasing the hours of existing employees, or giving existing employees a raise.

Vote 53 Federal-Provincial Pandemic Contingencies

Municipalities ($270 million provincial and $270 million federal funding for a total of $540 million): Funding to local governments in response to revenue loss and additional service needs, such as increased funding to address homelessness and community safety, as a result of COVID-19.

Transit ($540 million provincial and $540 million federal funding for a total of $1.08 billion): Funding to BC Transit, TransLink and BC Ferries in response to revenue loss and additional service needs as a result of COVID-19.

Statutory Spending, Tax and Other Relief Measures

Reduced school tax for commercial properties for the 2020 calendar year ($714 million for calendar year 2020 or $566 million for fiscal 2020/21): Reduced the school property tax rate for commercial properties (property classes 4, 5, 6, 7, and 8) to achieve an average 25 per cent reduction in the total property tax bill for most businesses for the 2020 calendar year.

B.C. Climate Action Tax Credit one-time enhancement ($500 million): Approximately 80 per cent of British Columbians will benefit from a one-time enhancement to the B.C. Climate Action Tax Credit in July 2020 of up to $174.50 for adults and up to $51.25 per child. With this enhancement and the regular credit amount, an eligible family of four will receive a combined payment of up to $564 and eligible individuals will receive a combined payment up to $218. This boosts the regular Climate Action Tax Credit payment of up to $112.50 per family of four and up to $43.50 per adult.

Temporary PST Rebate on Select Machinery and Equipment ($470 million): Effective September 17, 2020, eligible businesses will receive a 100 per cent PST rebate on select machinery and equipment. This program will run for one year, ending on September 30, 2021. This will support businesses to pivot operations to meet provincial health orders and adjust to a post-COVID economy.

Temporary Pandemic Pay ($106 million provincial, $319 million federal for a total of $425 million): This is a federal-provincial cost-shared program to provide a one-time temporary wage boost that supports health, social services and corrections employees delivering in-person, front-line care during the COVID-19 pandemic. Pandemic pay will benefit over 250,000 front-line workers in health and social services by providing an hourly wage boost over the 16-week period starting on March 15, 2020, during the height of the Province’s initial response to the pandemic. The province’s contributions to the program is partially funded through Vote 52 Contingencies ($41 million for payroll related deductions for the Pandemic Pay program such as EI, CPP and EHT) and partially funded through statutory spending ($65 million for wage related costs of the program that are eligible for statutory spending under the Financial Administration Act).

42 |

Fall 2020 Economic & Fiscal Update

Appendix – Description of COVID-19 Measures

Delays to the planned increase in the carbon tax rate and delays in the effective date of other new tax measures ($268 million): Postponing the scheduled increase to the carbon tax rate and delaying the implementation of the PST on sweetened, carbonated drinks and change to PST registration requirements to April 1, 2021.

Housing Priority Initiatives (HPI) Special Account hotel purchases ($111 million): To provide temporary housing for those formerly living in the encampments in Oppenheimer Park, Pandora Avenue and Topaz Park, the Province has purchased four hotels:

Comfort Inn (Victoria) – approx. $19.6 million

Paul’s Motor Inn (Victoria) – approx. $14.5 million

Howard Johnson Hotel (Vancouver) – approx. $56.9 million

Buchan Hotel (Vancouver) – approx. $19.7 million

Statutory spending under the HPI special account for the hotels (and related closing costs) will support temporary housing for those formerly living in the encampments in the short and medium term while a permanent long-term housing plan is under development.

Emergency Program Act (EPA) – COVID-19 related costs ($68 million):

Under the EPA, the Province anticipates statutory spending above the voted allocation to manage emergency costs within scope of the act. This includes an estimated $44 million for COVID-19 related emergency management costs such as costs related to managing emergency operations centres to support provincial, regional and local coordination, and emergency measures to support returning travellers and temporary foreign workers with self-isolation requirements.

Temporary wholesale pricing for liquor licenses ($26 million):

Wholesale pricing that will allow liquor licensees, such as restaurants, bars and tourism operators, to purchase beer, wine and spirits at reduced cost from the end of July 2020 to March 31, 2021.

ICBC temporary fee relief measures ($17 million): Temporary changes in effect to August include:

Waiving the $30 fee when you cancel insurance

Waiving the $18 plating fee when you choose to reinstate the policy on your vehicle

Suspension of insurance for fleet vehicle customers

Forest Enhancement Society ($11 million): Revised spending targets for the Forest Enhancement Society to ensure that its tree planting continues as planned to secure future economic and environmental benefits while meeting the new COVID-19 related guidelines for industrial camps.

Commercial Recreation Tenures and Permits Financial Relief ($3 million): Financial relief for rent owing for Land Act commercial recreation tenures, adventure guides, and commercial recreation park use permits under the Park Act to support tourism operators experiencing financial hardship due to the COVID-19 pandemic.

Fall 2020 Economic & Fiscal Update

| 43

Appendix – Description of COVID-19 Measures

Temporary Deferral Measures

Six-month moratorium on student loan collection ($70 million in deferrals): Starting March 30, 2020, all B.C. student loan repayments were automatically frozen until September 30, 2020.

BC Hydro bill deferrals for industrial customers and other relief measures

($103 million): Qualifying major industrial customers, like pulp and paper mills and mines, were able to defer 50 per cent of their bill payments for six months, to the end of August 2020. In addition, the industrial relief includes bill relief to certain large industrial customers in the form of reduced demand charges. BC Hydro also provided bill relief and credit to residential and commercial customers.

Stumpage Fee Deferrals ($2 million): To support companies with financial liquidity while navigating through the COVID-19 crisis, a stumpage fee deferral was available to tree farm licences, replaceable forest licences and First Nations woodlands licence holders. The deferral period was for 3 months (May 1, 2020 to July 31, 2020) and interest accrued on any outstanding balances that carried through the deferral period. The revenue deferred from this program was estimated at $2 million and have since been repaid.

Postponing municipal remittance date for school taxes to the end of the calendar year (over $1 billion in deferrals): Delayed the remittances from the summer to the end of the year to provide significant relief to local governments facing cash flow issues.

Extending tax filing and payment deadlines (over $5 billion in deferrals): Provided administrative relief to businesses by postponing the filing and payment date by six months for PST, municipal and regional district tax on short-term accommodation, tobacco tax, motor fuel tax, and carbon tax; and until April 1, 2021 for the employer health tax instalment payment deadlines.

For more details, visit: https://www2.gov.bc.ca/gov/content/safety/emergency-preparedness-response-recovery/covid-19-provincial-support

44 |

Fall 2020 Economic & Fiscal Update

PART 2 | ECONOMIC REVIEW AND OUTLOOK¹

Summary

Like other economies globally and in Canada, B.C.’s economy has been significantly impacted by the COVID-19 pandemic. There have been widespread job losses and impacts to businesses and households. The province, however, began easing restrictions in mid-May and is currently in Phase 3 of BC’s Restart Plan. This reopening, along with the continued relief measures and supports being provided by the provincial and federal governments and the Bank of Canada, is supporting the economy along its recovery path. However, downside risks to the recovery persist. There will continue to be increases and decreases in community transmission over time, depending on adherence to containment measures, until there is widespread population immunity.

There is a high degree of uncertainty regarding the evolution of the pandemic and its associated impacts. The outlook is conditional on various assumptions which could change substantially over the coming months. As such, the outlook is subject to a larger than normal degree of prudence, uncertainty, and potential revision.

Chart 2.1 Ministry’s Outlook for B.C. Prudent Compared to Private Sector

The economic outlook assumes that provincial, national, and global economic activity does not return to pre-pandemic levels by the end of next year. It is assumed that a return to pre-pandemic levels will occur between late 2022 and early 2023, once there is a large-scale global immunization campaign well underway and an easing of global travel restrictions. Furthermore, the exact timing of the recovery will vary by jurisdiction and depend on the success of containment measures and efficacy of the vaccines. As such, some sectors such as tourism, hospitality, recreation, and retail are not anticipated to be operating at full capacity for some time.

The Ministry forecasts the economy to contract by 6.2 per cent in 2020, before expanding by 3.0 per cent in 2021. At this point in time, however, the outlook is still far more uncertain than usual. The duration of the pandemic and its associated impacts are unknown, making the precise path of the economic recovery difficult to predict.

¹ Reflects information available as of November 20, 2020, unless otherwise indicated.


	Fall 2020 Economic & Fiscal Update	\| 45

Economic Review and Outlook

The Ministry’s forecast for B.C. real GDP is 1.0 percentage point lower than the average outlook of six private sector forecasters² (a subset of the Economic Forecast Council) in 2020 and 1.5 percentage points lower in 2021. This differential is one of the levels of prudence built into the fiscal plan.

The main downside risk to B.C.’s economic outlook includes uncertainty regarding the impact of COVID-19 on the provincial, national, and global economies and the recovery path. Other risks include ongoing trade tensions, weakening global economic activity, and lower commodity prices.

British Columbia Economic Activity and Outlook

The Ministry forecasts B.C. real GDP to decline by 6.2 per cent in 2020 and grow by 3.0 per cent in 2021, which is an improvement from the First Quarterly Report projection that showed a real GDP decline of 6.7 per cent in 2020 and growth of 3.0 per cent in 2021.

Table 2.1 British Columbia Economic Indicators

				Year-to-Date
	Apr. to Jun. 2020		Jul. to Sep. 2020	Jan. to Oct. 2020
	change from		change from	change from
All data seasonally adjusted	Jan. to Mar. 2020		Apr. to Jun. 2020	Jan. to Oct. 2019
	Per cent change		Per cent change	Per cent change
Employment		-11.5	+8.7		-7.0
Manufacturing shipments¹		-9.0	+15.1		-6.5
Exports¹		-7.2	+6.7		-12.4
Retail sales¹		-9.1	+16.9		-0.6
Housing starts		-11.6	+16.8		-19.9
Non-residential building permits¹		-14.5	+9.5		-24.9

¹ Data to September

The improvement in the outlook for 2020 reflects recent data releases that have shown better than expected employment gains, along with a rebound in retail sales and housing activity which are both higher than the pre-pandemic levels observed in February. Meanwhile, global trade remains subdued, reflected by declining exports.

The Ministry forecasts B.C. nominal GDP to decline by 6.0 per cent in 2020, which is about the same as the real GDP decline due to low price growth. This is an improvement from the First Quarterly Report projection of a 6.5 per cent decline. The upward revision in nominal GDP reflects the gain in real activity discussed above. Meanwhile, B.C. nominal GDP is forecast to grow by 3.9 per cent in 2021, which is lower than the First Quarterly Report projection of 4.8 per cent growth. This downward revision reflects lower expectations for price growth.

A major decline in economic activity is expected across all provinces. An average of six private sector forecasters expect B.C. real GDP to decline by 5.2 per cent in 2020 and grow by 4.5 per cent in 2021. This is better than the expected decline of 5.7 per cent on average across Canada for 2020 and similar to the 4.5 per cent growth expected nationally for 2021.

A subset of the Economic Forecast Council that regularly forecasts economic performance in all provinces (BMO, CIBC, National Bank, RBC, Scotiabank and TD), as of October 30, 2020.

46 |

Fall 2020 Economic & Fiscal Update

Economic Review and Outlook

Labour Market

The labour market has been significantly impacted by the COVID-19 pandemic. In March and April, an unprecedented number of jobs were lost, with employment falling by 396,500 (-15.6 per cent). In addition, many who remained employed during this period experienced reduced hours. Encouragingly though, B.C. has seen significant gains in employment since the low point in April. From May to October, 335,200 jobs were regained as many sectors of the economy re-opened. Nevertheless, there were still 61,300 fewer people employed in October than in February (-2.4 per cent). Some service industries, particularly those heavily impacted by social distancing and travel restrictions, continue to struggle. These sectors include wholesale and retail trade, accommodation and food services, transportation and warehousing, and other services. The goods sector has also been impacted, primarily construction. Job losses have also been uneven across demographics. Women and youth experienced outsized job losses, as they tend to be over-represented in some of the hardest hit service sectors. However, as of October, while the level of youth employment was still relatively low compared to February, women were closer to their pre-pandemic employment levels than men.

On a year-to-date basis, B.C. employment declined by 7.0 per cent compared to the January to October period of 2019. This translates into a net loss of around 179,600 jobs, with about 123,400 of these losses in full-time jobs and around 56,200 in part-time jobs. The bulk of job losses were seen in information, culture and recreation (-32,000 jobs), accommodation and food services (-31,500 jobs), construction (-21,800 jobs), wholesale and retail trade (-21,200 jobs), and business, building and other support services (-18,600 jobs).

Chart 2.2 B.C. Employment

Fall 2020 Economic & Fiscal Update

| 47

Economic Review and Outlook

The unemployment rate in B.C. was 8.0 per cent in October. This is down from a high of 13.4 per cent in May, but still much higher than February’s 5.0 per cent. Furthermore, the unemployment rate does not fully reflect job losses because it excludes unemployed adults that are not actively searching for work (a group that grew in the wake of the pandemic). It also does not reflect all work lost; many workers that remained employed this year faced reduced hours. Year-to-date to October 2020, B.C.’s unemployment rate averaged 9.3 per cent, which was 4.6 percentage points above its average over the same period of last year. Meanwhile, B.C.’s labour force declined by 2.3 per cent, reflecting a drop in the labour force participation rate from 65.7 per cent to 63.0 per cent.

Aggregate wages and salaries data indicate that during the initial stage of the pandemic there was a 3.7 per cent and a 6.7 per cent monthly decline in wages during March and April, respectively. Year-to-date to June, aggregate wages and salaries decreased 1.1 per cent compared to the first six months of last year.

Outlook

B.C.’s labour market has so far performed better than expected. However, the path forward remains uncertain as those sectors most heavily impacted by the virus (such as tourism, hospitality, recreation, and retail) are not anticipated to be operating at full capacity for some time. The Ministry forecasts employment in B.C. to decrease by 6.6 per cent in 2020 (approximately -170,000 jobs), followed by annual growth of 4.1 per cent in 2021 (approximately +99,000 jobs).

The province’s unemployment rate is expected to average 9.3 per cent in 2020 and 8.1 per cent in 2021.

Consumer Spending and Housing

In the wake of the COVID-19 pandemic, job losses, precautionary saving behaviour, reduced confidence, and physical distancing weighed on consumer spending. In April, B.C. nominal retail sales declined by nearly one-fifth compared to the previous month, amounting to the largest monthly decline on record (data going back to 1991). However, as restrictions began to ease in May, nominal retail sales began to recover and by June they had returned to their pre-pandemic (February) levels. Growth was more moderate from July through September but remained positive.

Despite this encouraging rebound, year-to-date to September 2020 nominal retail sales were still 0.6 per cent lower than during the same period of 2019. Lower retail sales, relative to the first nine months of 2019, were concentrated in clothing and clothing accessories stores (-31.5 per cent), gasoline stations (-13.4 per cent), furniture and home furnishing stores (-12.6 per cent), and motor vehicle and parts dealers (-7.8 per cent). These declines were partially offset by year-to-date gains in sales at food and beverage stores (+14.3 per cent), building material and garden equipment and supplies stores (+12.0 per cent), and general merchandise stores (+7.4 per cent). In addition, the hospitality sector has been particularly hard hit with sales at food services and drinking places down by 26.2 per cent year-to-date to August compared to the same period last year.

48 |

Fall 2020 Economic & Fiscal Update

Economic Review and Outlook

Chart 2.3 B.C. Retail Sales

Alongside spending activity, consumer caution has also been reflected in B.C.’s consumer confidence index. Confidence fell by 83.6 points in two months to reach its lowest level on record in April (the Conference Board of Canada’s BC Consumer Confidence Index goes back to 2002). Sentiment has improved somewhat in recent months, but remains subdued relative to pre-pandemic levels.

Housing market activity in B.C. has been resilient despite the pandemic. The COVID-19 pandemic, physical distancing measures, and the suspension of open houses disrupted B.C.’s housing market this past spring. By April, new listings and home sales had fallen to record lows in the province. However, as restrictions began to ease in May, activity resumed swiftly and by July both metrics had surpassed their February levels. Overall, B.C. MLS home sales increased by 16.0 per cent year-to-date to October 2020 compared to the same period of 2019. Underlying this were higher sales in nearly every region, including the four largest: Greater Vancouver (+21.2 per cent), Fraser Valley (+22.2 per cent), Okanagan-Mainline (+13.2 per cent), and Victoria (+11.5 per cent).

B.C.’s average home sale price increased by 10.5 per cent year-to-date to October 2020 compared to the same period of 2019. This reflected multiple factors, including pent-up demand, lower interest rates, and relatively stronger sales in the more expensive regions of Greater Vancouver and the Fraser Valley.

Fall 2020 Economic & Fiscal Update

| 49

Economic Review and Outlook

Chart 2.4 B.C. Home Sales and Price

Regional MLS composite benchmark house prices (which are seasonally adjusted and incorporate all dwelling types) for Greater Vancouver and the Fraser Valley were higher than last year. On a year-to-date to October basis, the composite benchmark house prices for Greater Vancouver and the Fraser Valley both increased by 3.2 per cent compared to the same period of 2019, with price increases across all dwelling types.

Chart 2.5 Greater Vancouver HPI Benchmark Price

50 |

Fall 2020 Economic & Fiscal Update

Economic Review and Outlook

Housing starts have been resilient so far this year, averaging 36,070 annualized units over the January to October period of 2020. This strength has been broadly consistent with recent building permit issuance, led by the large multiple-unit segment. Nevertheless, B.C. housing starts fell on a year-to-date basis, largely because of record-high construction levels observed last year. Starts decreased by 19.9 per cent year-to-date to October compared to the same period in 2019. The value of residential building permits, a leading indicator of home construction, decreased by 11.7 per cent year-to-date to September 2020.

Chart 2.6 B.C. Housing Starts

Outlook

Consumer spending is expected to decline this year due to job losses, lower income, and weak consumer confidence, before picking up next year as employment and income prospects improve. The Ministry forecasts real household consumption of goods and services to decrease by 5.8 per cent in 2020, followed by projected growth of 2.9 per cent in 2021.

The Ministry expects nominal retail sales to be relatively flat, at 0.1 per cent growth in 2020 and then increase by 2.4 per cent in 2021.

The Ministry forecasts the total value of home sales to increase by 15.4 per cent in 2020 and then by 2.8 per cent in 2021. Underlying this is growth in unit sales and average prices. Unit home sales in B.C. are forecast to increase by 6.5 per cent in 2020 and 2.0 per cent in 2021. Meanwhile, average home sale price growth in B.C. is expected to be 8.4 per cent in 2020 and 0.8 per cent in 2021.

The Ministry expects B.C. housing starts to total approximately 35,500 units in 2020 and 32,000 units in 2021.

Fall 2020 Economic & Fiscal Update

| 51

Economic Review and Outlook

Business and Government

Non-residential construction permitting has slowed so far this year, following strong gains over the past few years. The total value of non-residential building permits fell by 24.9 per cent year-to-date to September 2020 compared to the same period of 2019. Underlying this were significant declines in permit issuance for commercial buildings (-36.2 per cent) and industrial buildings (-16.0 per cent) relative to the first nine months of 2019. Meanwhile, the value of permit issuance for institutional and governmental buildings increased (+12.6 per cent).

Small business confidence in B.C. fell to a record low in March, according to the Canadian Federation of Independent Business index of small business confidence. Although the October index reading indicated that small business confidence in the longer term (one year out) has recovered, businesses remain particularly concerned about the short-term outlook (over the next few months).

B.C.’s tourism sector has been severely impacted by COVID-19. The number of international travelers entering the province collapsed as travel restrictions were put in place to support containment. By April, the number of international travelers entering the province had contracted by 96.4 per cent compared to February. Visitor numbers have remained relatively unchanged since then. Year-to-date to August, the number of international visitors was down by 69.1 per cent from the same period in 2019.

Outlook

Total real investment in B.C. (business and government) is forecast to fall by 6.5 per cent in 2020 before returning to positive growth of 2.0 per cent in 2021.

Real business investment is projected to fall by 11.0 per cent in 2020, with declines expected in all segments. Looking further ahead, real business investment is forecast to grow by 2.0 per cent in 2021.

Real expenditure on goods and services by all levels of government is forecast to increase by 6.6 per cent in 2020, driven by the government response to the COVID-19 pandemic. The provincial and federal governments responded quickly to the pandemic with significant relief measures and supports for households and businesses. In 2021, real spending growth is currently expected to be relatively flat at 0.1 per cent.

The Ministry expects the nominal net operating surplus of corporations (an approximation of corporate profits) to decrease by 14.2 per cent in 2020. In 2021, it is forecast to increase by 5.0 per cent, supported by a rebound in economic activity.

52 |

Fall 2020 Economic & Fiscal Update

Economic Review and Outlook

External Trade and Commodity Markets

As COVID-19 impacted economies around the world, B.C.’s merchandise goods exports contracted. Broad-based declines reflected a combination of weaker global demand, lower commodity prices, and supply constraints in the forestry sector. During the January to September period of 2020, the value of B.C. merchandise exports decreased by 12.4 per cent compared to the same period of 2019. Over ninety per cent of this decline was attributable to lower exports in three large categories: energy products (-25.4 per cent), forestry products and building and packaging materials (-13.3 per cent), and metal and non-metallic mineral products (-11.0 per cent).

International exports to all of B.C.’s major trading partners have declined. The value of merchandise exports to the U.S. fell by 2.8 per cent and to non-U.S. destinations by 21.8 per cent during the January to September period of 2020 compared to the same period of last year. Energy products dominated the declines to both U.S. and non-U.S. destinations. Exports of pulp and paper, machinery and equipment, and metallic mineral products to all destinations also saw significant declines. However, while exports of solid wood products to non-U.S. international destinations contracted by about one-third, their shipments to the U.S. increased by nearly one-tenth.

Chart 2.7 B.C. Exports

B.C.’s manufacturing shipments decreased by 6.5 per cent year-to-date to September 2020 compared to the same period of 2019. Declines were broad-based. Among durable goods, there were notable declines in dollar terms in shipments of fabricated metal products (-14.1 per cent), transportation equipment (-18.8 per cent), machinery (-12.6 per cent), and primary metal manufacturing (-11.6 per cent). The bulk of declines in non-durable goods were attributable to lower shipments of paper products (-22.4 per cent).

Fall 2020 Economic & Fiscal Update

| 53

Economic Review and Outlook

So far in 2020, limited lumber supply and a resilient U.S. housing market have supported high lumber prices. Most notably, the price of Western spruce-pine-fir (SPF) 2x4 lumber averaged $548 US/000 board feet during the January to October period of 2020, up by 49.4 per cent from the same period last year. Meanwhile, the price of pulp averaged $837 US/tonne, down by 14.8 per cent compared to the first ten months of 2019.

Slower global economic activity related to the COVID-19 pandemic has impacted both supply and demand of energy. The West Texas Intermediate (WTI) price averaged $38.28 US/barrel in the first ten months of 2020, down by 32.5 per cent compared to the same period of 2019. Meanwhile, the plant inlet price of natural gas averaged $0.82 C/GJ year-to-date to October 2020, up by 16.5 per cent from the same period of 2019.

Base metal and mineral prices experienced broad-based declines earlier this year, as reduced global demand weighed on prices. Year-to-date to October, prices for molybdenum, zinc, lead, copper, and metallurgical coal all recorded declines compared to the January to October period of 2019. By contrast, prices for gold and silver increased substantially over the same period.

Outlook

Due to weaker global demand, real exports of goods and services are forecast to contract by 12.3 per cent in 2020. The pace of real export growth is projected to gradually improve to 4.0 per cent in 2021.

The price of lumber is forecast to average $520 US/000 board feet in 2020 and $450 US/000 board feet in 2021. The plant inlet price for natural gas is expected to average $1.08 C/GJ in 2020/21. The outlook is subject to considerable uncertainty, as commodity prices can be volatile.

Demographics

On July 1, 2020, B.C.’s population was 5.15 million people, up 1.1 per cent from July 1, 2019. During the first half of 2020 the province welcomed 15,198 net new residents. This was 64.2 per cent lower than during the same period of 2019. Declines were driven by lower net international migration (-88.5 per cent), as the world experienced COVID-19 related travel restrictions. Interprovincial migration, on the other hand, rose (+18.5 per cent). As a result, only around one-quarter of new residents relocated to B.C. from other countries and the remaining majority were net interprovincial migrants.

Outlook

The forecast calls for B.C.’s July 1 population to increase by 1.0 per cent in 2021.

Total net migration is expected to be about 30,900 persons in 2020 and 60,000 persons in 2021. International migrants are expected to make up around half of newcomers to B.C. this year. However in 2021, they are expected to once again make up about 80 per cent of migrants, as they have in recent years. The outlook is more uncertain than usual, as the COVID-19 pandemic could continue to have a material impact on international migration going forward.

54 |

Fall 2020 Economic & Fiscal Update

Economic Review And Outlook

Inflation

The COVID-19 pandemic has resulted in shifting consumer spending patterns and has impacted the supply and demand of goods and services. Although there have been certain goods, such as food items and health and personal care items, for which prices have risen, price declines in other goods and services (particularly gasoline, recreation, and clothing and footwear) have led to weak overall growth in B.C.’s Consumer Price Index (CPI). The year-over-year annual CPI inflation rate in October was 0.5 per cent, down from 2.4 per cent in February.

Year-to-date to October, consumer prices rose by 0.7 per cent compared to the same period of 2019. Higher prices in categories such as food, shelter, and health and personal care, were partially offset by lower prices for recreation, transportation, and energy. The transportation and energy declines were largely due to lower gasoline prices, as world crude oil prices have only partly recovered from significant price declines in March and April.

Chart 2.8 B.C. Inflation

Outlook

Consumer price inflation in B.C. is forecast to be 0.7 per cent in 2020 before rising to 1.5 per cent in 2021. For Canada, annual rates of inflation in 2020 and 2021 are forecast to be the same as those of B.C.

Fall 2020 Economic & Fiscal Update

| 55

Economic Review And Outlook

Risks to the Economic Outlook

B.C.’s economy, like other Canadian and global economies, has been significantly impacted by the COVID-19 pandemic in a way that has not been seen before. There are various elements of uncertainty that will influence the depth and duration of the economic slowdown and recovery. The economic forecast is based on information that is currently available and assumptions about the future path of recovery, and the outlook is subject to a larger than normal degree of uncertainty and potential revision. Downside risks to B.C.’s economic outlook include the following:

future outbreaks of COVID-19 in B.C. and among B.C.’s trading partners;

shifts in consumer and business behaviour and confidence due to COVID-19;

weakening global economic activity, exacerbated by COVID-19, resulting in reduced demand for B.C.’s commodity exports;

ongoing global trade tensions and broader economic challenges in Asia, Europe, and the U.K.;

higher volatility in international foreign exchange, stock, and bond markets;

lower commodity prices, particularly for lumber, pulp, and coal; and

timing of investment and hiring related to the LNG Canada project, similar to the risks that exist for other major capital projects.

External Outlook

The external outlook deteriorated in the wake of the COVID-19 pandemic. Economic data now suggests that the global economy could face its largest annual contraction on record. Furthermore, the chances of a global V-shaped recovery (that is, a swift bounce-back to pre-pandemic activity levels) are waning as many countries that had started to reopen have experienced a resurgence of COVID-19 cases. Underlying the global outlook are uneven recovery prospects across countries and industries. Prospects vary with the degree to which the virus has been contained and with the extent to which economic activities can take place in the presence of containment measures.

United States

U.S. real GDP grew by an annualized 33.1 per cent in the third quarter of 2020. This rebound constituted a recovery of about two-thirds of the economic activity lost since the onset of the pandemic. In the first and second quarters, real GDP fell by annualized rates of 5.0 per cent and 31.4 per cent, respectively. This severe contraction was caused by widespread and substantial declines in consumer spending, exports, business investment, and inventories. Higher government spending provided a slight offset. The second quarter loss and third quarter rebound were the largest quarterly swings on record (data going back to 1947). The rebound in the third quarter was mainly supported by consumer spending and private sector investment.

After seeing record declines in April, the U.S. labour market has gradually improved. However, only a little over half of the jobs lost have been recovered. Employment in October was still 6.6 per cent lower (-10,090,000 jobs) than in February and the unemployment rate was 6.9 per cent. The February unemployment rate was 3.5 per cent. Year-to-date to October, U.S. employment fell by 5.7 per cent compared to the same period of 2019. The U.S. unemployment rate averaged 8.4 per cent year-to-date to October, up 4.7 percentage points compared to the first ten months of last year. Meanwhile, the U.S. labour force participation rate averaged 61.8 per cent year-to-date to October, down 1.2 percentage points compared to the same period of 2019.

56 \|	Fall 2020 Economic & Fiscal Update

Economic Review And Outlook

Chart 2.9 U.S. Real GDP

U.S. home building activity has been relatively resilient, with housing starts up year-to-date relative to last year. Having averaged 1.35 million annualized units from January to October, they were 7.6 per cent higher compared to the same period of 2019. Meanwhile, residential building permits were up 1.9 per cent year-to-date to October compared to the same period of 2019.

Chart 2.10 U.S. Housing Starts

Fall 2020 Economic & Fiscal Update

| 57

Economic Review And Outlook

U.S. home sales activity has been somewhat mixed so far this year. New home sales have been very strong and were up 17.1 per cent in the first nine months of 2020 compared to the same period last year. Sales growth for existing home sales, on the other hand, was up by a smaller 2.9 per cent year-to-date to October.

In contrast to sales activity, median sale price growth has been stronger among existing homes. New home prices increased by 3.0 per cent year-to-date to September compared to the same period of 2019, while existing home prices rose by 8.6 per cent year-to-date to October.

After experiencing record declines in March and April, U.S. nominal retail sales posted impressive gains in the subsequent months and were up 4.9 per cent in October compared to February. Despite the rebound, retail sales were virtually flat year-to-date to October (-0.1 per cent) compared to the same period last year. Underlying this small contraction were large declines in sales at businesses such as food services and drinking places, clothing and accessory stores, and gasoline stations that were mostly offset by large increases in sales at non-store retailers and food and beverage stores, among others.

U.S. consumer confidence saw a record drop in April, and although it improved somewhat, it has remained subdued. Year-to-date to October, it was 25.3 points lower than during same period of 2019.

The challenging global trade conditions facing exporters last year have intensified substantially due to the global COVID-19 pandemic, ongoing U.S.-China trade tensions, and the slump in oil prices. As of September, the value of U.S. merchandise exports was down by 15.2 per cent on a year-to-date basis compared to the same period of 2019.

Outlook

Consensus Economics (Consensus) forecasters have recently raised their near-term projections for U.S. economic growth. The October 2020 Consensus survey forecasts U.S. real GDP to fall by 4.0 per cent in 2020, up from previous projections but still substantially below pre-pandemic forecasts (see Chart 2.11). For 2021, the October 2020 Consensus forecasts a rebound in the U.S. economy and growth to be 3.7 per cent.

Table 2.2 U.S. Real GDP Forecast: Consensus versus B.C. Ministry of Finance

	2020		2021
	Per cent change in real GDP
B.C. Ministry of Finance		-5.0		2.5
Consensus Economics (October 2020*)		-4.0		3.7

* Comparable month to B.C. Ministry of Finance forecast.

Uncertainty regarding the ongoing COVID-19 pandemic and trade tensions continue to cloud the economic outlook. In recognition of this uncertainty, the Ministry’s assumptions for U.S. growth are lower than the October 2020 Consensus (the Consensus comparable to when Ministry assumptions were developed). The Ministry assumes that U.S. real GDP will fall by 5.0 per cent in 2020, before expanding by 2.5 per cent in 2021.

58 \|	Fall 2020 Economic & Fiscal Update

Economic Review And Outlook

Chart 2.11 Consensus Outlook for the U.S. in 2020

Canada

The onset of the COVID-19 pandemic, in conjunction with the related plunge in oil prices, has presented an unparalleled challenge for the Canadian economy. Following an annualized 8.2 per cent decline in the first quarter of the year, Canadian real GDP shrunk by an additional annualized 38.7 per cent in the second quarter of 2020. This was the largest contraction on record by far. The second quarter saw widespread and substantial declines in consumer spending, business investment, and exports.

Chart 2.12 Canadian Real GDP

Fall 2020 Economic & Fiscal Update

| 59

Economic Review And Outlook

The Canadian economy shed over 3 million jobs in just two months, with employment reaching its lowest point in April. And while the labour market has shown signs of improvement, adding 2,368,600 jobs during the May to October period, this still left employment 3.3 per cent lower in October than in February. In year-to-date to October terms, employment was 5.7 per cent lower than the during same period last year and the unemployment rate was 4.0 percentage points higher on average at 9.7 per cent. Underlying this were sharp losses in both full-time and part-time work, year-to-date.

After seeing significant declines in March and April, Canadian housing starts recovered swiftly over the summer before moderating in the fall. Year-to-date to October, housing starts averaged 212,700 units, an increase of 1.1 per cent compared to the same period last year. This growth was mainly due to strong numbers in the urban centers of Toronto and Ottawa, which offset declines in other parts of the country. MLS home sales were up 7.8 per cent year-to-date to October compared to the first ten months of last year. The national average home sale price was 10.7 per cent higher on a year-to-date basis compared to the same period of last year.

Canadian nominal retail sales saw large monthly contractions in March and April, with the latter being the largest fall on record. However, substantial bounce backs in May and June, followed by more moderate growth, led to the level of retail sales returning to and slightly surpassing their pre-pandemic levels. Nevertheless, sales so far this year are down. Year-to-date to September 2020, retail sales declined by 4.0 per cent compared to the same period of 2019.

The challenging global trade conditions facing exporters last year have intensified substantially due to the global COVID-19 pandemic and the slump in oil prices. As of September, the value of Canadian merchandise exports was down by 14.6 per cent on a year-to-date basis compared to the same period of 2019. Relatedly, shipments of Canadian manufactured goods were 13.5 per cent lower year-to-date to September.

Outlook

The October 2020 Consensus forecasts Canadian real GDP to fall by 5.8 per cent in 2020, before expanding by 4.9 per cent in 2021.

Table 2.3 Canadian Real GDP Forecast: Consensus versus B.C. Ministry of Finance

	2020		2021
	Per cent change in real GDP
B.C. Ministry of Finance		-6.5		3.8
Consensus Economics (October 2020*)		-5.8		4.9

* Comparable month to B.C. Ministry of Finance forecast.

The Canadian economic outlook is clouded by uncertainty regarding potential long-term economic disruptions due to the COVID-19 virus. Additionally, global trade tensions and volatile commodity prices add risks to the outlook. Accordingly, the Ministry’s outlook is lower than the October 2020 Consensus (the Consensus comparable to when Ministry assumptions were developed). The Ministry assumes that the Canadian economy will contract by 6.5 per cent in 2020, followed by 3.8 per cent growth in 2021.

60 \|	Fall 2020 Economic & Fiscal Update

Economic Review And Outlook

Chart 2.13 Consensus Outlook for Canada in 2020

Asia

China was the first country to initiate containment measures to tackle the COVID-19 virus and is now one of the countries furthest along in reopening their economy. Real GDP growth returned to positive territory by the second quarter, and by the third quarter, it appeared that China had managed a V-shaped recovery. Real GDP rebounded by an annualized 59.5 per cent in the second quarter after the first quarter’s annualized 36.5 per cent decline. The economy continued to expand in the third quarter, growing by an annualized 13.4 per cent. The recovery has been led by domestic factors such as investment and more recently consumer spending, along with monetary and fiscal measures introduced to support the economy.

Following three consecutive quarters of contraction, Japan’s economy grew by an annualized 21.4 per cent in the third quarter of 2020. This rebound constituted a recovery of about forty per cent of the economic activity lost in the preceding three-quarter period. The fourth quarter of 2019 and the first and second quarters of 2020 saw annualized declines of 7.1 per cent, 2.3 per cent, and 28.8 per cent, respectively. Some of the sharpest underlying declines were observed in private consumption and exports. Increasing consumption and exports, along with lower imports, drove the rebound in the third quarter. As of October 29, 2020, the Bank of Japan continued to characterize the economic situation as severe and reiterated that monetary conditions would remain accommodative.

Fall 2020 Economic & Fiscal Update

| 61

Economic Review And Outlook

Outlook

The October 2020 Consensus forecasts China real GDP to grow by 2.3 per cent in 2020 and by 7.9 per cent in 2021. U.S.-China tensions and the potential resurgence of COVID-19 could impact China’s economic growth going forward. As such, the Ministry assumes that China’s economy will expand by 1.7 per cent in 2020 and 6.3 per cent in 2021.

The October 2020 Consensus forecasts Japan real GDP to contract by 5.7 per cent in 2020 before growing by 2.5 per cent in 2021. In recognition of both foreign and domestic challenges to Japan’s economy, the Ministry assumes that Japan’s real GDP will fall by 6.4 per cent in 2020, before expanding by 1.5 per cent in 2021.

Europe

The euro zone has been acutely impacted by COVID-19 and several countries have taken drastic measures to combat the virus. These measures have had severe implications for the economy, especially for tourist-dependent countries in southern Europe. Despite a sharp rebound in real GDP in the third quarter (an annualized 60.5 per cent increase), activity remains below pre-pandemic levels. In the preceding first and second quarters, growth fell by an annualized 14.1 per cent and 39.5 per cent, respectively. Although there have been some encouraging signs in recent months, especially from the retail sector, a growing second wave of infections has further increased uncertainty going forward.

On October 29, 2020 the European Central Bank maintained its accommodative policies, leaving interest rates unchanged and maintaining its emergency bond-buying program. Earlier in the year, on July 21, 2020, the 27 members of the European Union (EU) agreed to borrow up to 750 billion euro in a stimulus plan to reverse the economic downturn. This short-term stimulus plan to help with the recovery is part of a broader 1.8 trillion euro seven-year budget plan.

The U.K. economy expanded by an annualized 78.0 per cent in the third quarter of 2020. This followed annualized declines of 58.7 per cent in the second quarter and 9.7 per cent in the first quarter. Despite the strong rebound, third quarter GDP was still only about nine-tenths the size that it was in the last quarter of 2019. The contraction in the first half of 2020 was largely driven by lower consumer spending and, to a lesser extent, exports and investment. The rebound was mainly due to recovering expenditures in the same categories. Uncertainty about Brexit and the renegotiation of trade deals, alongside ongoing challenges in managing the pandemic, continues to weigh on business confidence and cloud the economic outlook.

Outlook

The October 2020 Consensus forecasts the euro zone economy to fall by 7.5 per cent in 2020, before expanding by 5.3 per cent in 2021. The Ministry assumes the euro zone’s economy will contract by 8.5 per cent in 2020, before growing by 4.0 per cent in 2021.

62 \|	Fall 2020 Economic & Fiscal Update

Economic Review And Outlook

Financial Markets

Interest Rates

The COVID-19 pandemic has caused an unprecedented global economic contraction, prompting a broad array of extraordinary monetary and fiscal policy responses around the world.

On November 5, 2020, the US Federal Reserve (Fed) left the target range for the federal funds rate unchanged at 0.00 to 0.25 per cent, following two rate cuts totaling 150 basis points in March 2020. The Fed has also provided forward guidance by indicating its intention to keep interest rates at current levels until the economy has recovered, which includes improvements in the labour market as well as inflation that averages 2.0 per cent over time. The latter is an explicit shift in Fed policy (announced August 27, 2020), that allows for inflation to run above its long-standing target of 2.0 per cent. Further, the Fed has resumed large-scale asset purchases (i.e. quantitative easing), launched several credit facilities to support financial market functioning, and introduced a sequence of actions to support the flow of credit to households and businesses.

Chart 2.14 Interest Rate Forecasts

On October 28, 2020, the Bank of Canada maintained its target for the overnight interest rate at its stated effective lower bound of 0.25 per cent and left its quantitative easing program unchanged. Earlier in the year, the Bank made three interest rate cuts of 50 basis points each on March 4, March 13, and March 27. It has also provided forward guidance, committing to maintain the current policy rate and quantitative easing program until inflation is back on target at around 2.0 per cent and until the recovery is well underway. The Bank also noted that it expects the recovery to slow in the fourth quarter of 2020 as the boosts from the reopening of businesses and pent-up demand wane, containment measures are reintroduced in several provinces, and rising COVID-19 cases weigh on consumer confidence. On a related note, the benchmark posted rate on a 5-year fixed mortgage has declined and is currently at 4.79 per cent, a level not seen since June 2017.

Fall 2020 Economic & Fiscal Update

| 63

Economic Review And Outlook

Table 2.4 Private Sector Canadian Interest Rate Forecasts

	3-month Treasury Bill				10-year Government Bond
Average annual interest rate (per cent)	2020		2021		2020		2021
BMO		0.47		0.15		0.74		0.79
CIBC		0.48		0.31		0.75		0.88
National Bank		0.46		0.18		0.74		0.72
RBC		0.47		0.23		0.73		0.73
Scotiabank		0.46		0.15		0.73		1.00
TD		0.47		0.20		0.75		1.05
Average (as of October 8, 2020)		0.47		0.20		0.74		0.86

Outlook

The US Federal Reserve and Bank of Canada have signaled their commitment to support their respective economies and provide liquidity to the financial system. Based on the average of six private sector forecasts as of October 8, 2020, the Ministry assumes the U.S. federal funds rate to average 0.39 per cent in 2020 and 0.21 per cent in 2021. By comparison, the Bank of Canada’s overnight target rate is expected to average 0.56 per cent in 2020 and 0.25 per cent in 2021.

The Canadian three-month treasury bill interest rate is expected to average 0.47 per cent in 2020 and 0.20 per cent in 2021, according to the same six private sector forecasters. Meanwhile, the 10-year Government of Canada bond rate is assumed to be 0.74 per cent in 2020 and 0.86 per cent in 2021.

64 \|	Fall 2020 Economic & Fiscal Update

Economic Review And Outlook

Exchange Rate

After strengthening slightly against the US dollar around the start of this year, the Canadian dollar began to reverse course in February. It depreciated substantially in March and April as economic risk increased with the spread of COVID-19 and oil prices retreated. Since April, the Canadian dollar has appreciated back to pre-pandemic levels, as the US dollar lost ground against a broad basket of currencies (after initial gains as a safe haven in March) and oil prices rebounded.

Chart 2.15 Private Sector Expectations for the Canadian Dollar

Outlook

Based on the average of six private sector forecasts as of October 8, 2020, the Ministry assumes the Canadian dollar will average 74.2 US cents in 2020 and 76.1 US cents in 2021.

Table 2.5 Private Sector Exchange Rate Forecasts

Average annual exchange rate (US cents/Can $)	2020		2021
BMO		74.4		76.4
CIBC		74.2		75.0
National Bank		74.0		75.9
RBC		74.1		74.4
Scotiabank		74.3		77.2
TD		74.4		77.5
Average (as of October 8, 2020)		74.2		76.1

Fall 2020 Economic & Fiscal Update

| 65

Economic Review And Outlook

Table 2.6.1 Gross Domestic Product (GDP): British Columbia

					Forecast
	2018		2019		2020		2021
Gross Domestic Product at Market Prices:
– Real (chained 2012 $ billions)		264.8		271.8		255.0		262.6
(% change)		2.7		2.7		-6.2		3.0
– Nominal (current prices, $ billions)		296.1		309.1		290.6		302.1
(% change)		4.9		4.4		-6.0		3.9
– GDP price deflator (2012 = 100)		111.8		113.7		113.9		115.0
(% change)		2.1		1.7		0.2		1.0
Real GDP per person (chained 2012 $)		52,842		53,387		49,546		50,507
(% change)		1.1		1.0		-7.2		1.9
Real GDP per employed person
(% change)		1.6		0.0		0.5		-1.1
Unit labour cost¹ (% change)		3.5		2.9		2.4		0.2

Components of Real GDP at Market Prices (chained 2012 $ billions)
Household expenditure on goods and services		172.7		175.7		165.4		170.1
(% change)		2.8		1.7		-5.8		2.9
– Goods		70.7		70.6		70.4		70.9
(% change)		2.6		-0.2		-0.3		0.8
– Services		102.0		105.1		95.2		99.4
(% change)		2.9		3.0		-9.4		4.3
NPISH² expenditure on goods and services		4.1		4.3		4.2		4.2
(% change)		3.4		4.2		-3.0		0.2
Government expenditure on goods and services		46.3		47.8		50.9		50.9
(% change)		2.5		3.1		6.6		0.1
Investment in fixed capital		61.8		66.8		62.4		63.7
(% change)		1.7		8.0		-6.5		2.0
Final domestic demand		284.8		294.6		283.1		289.0
(% change)		2.5		3.4		-3.9		2.1
Exports of goods and services		103.2		104.2		91.4		95.1
(% change)		3.5		0.9		-12.3		4.0
Imports of goods and services		125.5		128.9		120.1		123.1
(% change)		3.3		2.7		-6.9		2.6
Inventory change		2.5		2.6		-1.0		-0.1
Statistical discrepancy		0.0		0.2		0.2		0.2
Real GDP at market prices		264.8		271.8		255.0		262.6
(% change)		2.7		2.7		-6.2		3.0

Unit labour cost is the nominal cost of labour incurred to produce one unit of real output.

Non-profit institutions serving households.

66 |

Fall 2020 Economic & Fiscal Update

Economic Review And Outlook

Table 2.6.2 Selected Nominal Income and Other Indicators: British Columbia

					Forecast
	2018		2019		2020		2021
Compensation of employees¹ ($ millions)		144,465		152,588		146,632		151,229
(% change)		6.3		5.6		-3.9		3.1
Household income ($ millions)		254,337		270,796		269,158		269,966
(% change)		3.8		6.5		-0.6		0.3
Net operating surplus ($ millions)		34,297		31,882		27,358		28,728
(% change)		2.0		-7.0		-14.2		5.0
Retail sales ($ millions)		85,933		86,428		86,508		88,607
(% change)		1.9		0.6		0.1		2.4
Housing starts (units)		40,857		44,932		35,499		32,038
(% change)		-6.4		10.0		-21.0		-9.7
Residential sales ($ millions)		55,860		54,174		62,539		64,261
(% change)		-24.2		-3.0		15.4		2.8
Residential sales (units)		78,526		77,350		82,342		83,951
(% change)		-24.5		-1.5		6.5		2.0
Residential Average Sale Price ($)		711,360		700,369		759,500		765,459
(% change)		0.4		-1.5		8.4		0.8
Consumer price index (2002 = 100)		128.4		131.4		132.3		134.3
(% change)		2.7		2.3		0.7		1.5

¹ Domestic basis; wages, salaries and employers’ social contributions.

Table 2.6.3 Labour Market Indicators: British Columbia

					Forecast
	2018		2019		2020		2021
Population (thousands at July 1)		5,010		5,091		5,148		5,200
(% change)		1.6		1.6		1.1		1.0
Net migration (thousands)
– International^1,4		61.3		66.0		15.9		46.0
– Interprovincial⁴		12.7		13.9		15.0		14.0
– Total		74.0		79.9		30.9		60.0
Labour force population² (thousands)		4,032		4,097		4,169		4,218
(% change)		1.3		1.6		1.8		1.2
Labour force (thousands)		2,617		2,685		2,633		2,706
(% change)		0.6		2.6		-1.9		2.8
Participation rate³ (%)		64.9		65.5		63.2		64.2
Employment (thousands)		2,494		2,559		2,389		2,488
(% change)		1.1		2.6		-6.6		4.1
Unemployment rate (%)		4.7		4.7		9.3		8.1

International migration includes net non-permanent residents and returning emigrants less net temporary residents abroad.

The civilian, non-institutionalized population 15 years of age and over.

Percentage of the labour force population in the labour force.

⁴

Components may not sum to total due to rounding.

Fall 2020 Economic & Fiscal Update

| 67

Economic Review And Outlook

Table 2.6.4 Major Economic Assumptions

					Forecast
	2018		2019		2020		2021
Real GDP
Canada (chained 2012 $ billions)		2,058		2,092		1,956		2,031
(% change)		2.0		1.7		-6.5		3.8
U.S. (chained 2012 US$ billions)		18,688		19,092		18,137		18,590
(% change)		3.0		2.2		-5.0		2.5
Japan (chained 2011 Yen trillions)		532		536		502		509
(% change)		0.3		0.7		-6.4		1.5
China (constant 2010 US$ billions)		10,875		11,539		11,736		12,475
(% change)		6.8		6.1		1.7		6.3
Euro zone¹ (chained 2010 Euro billions)		11,210		11,356		10,391		10,807
(% change)		1.9		1.3		-8.5		4.0
Industrial production index (% change)
U.S.		3.9		0.9		-8.5		2.8
Japan		1.0		-2.6		-12.0		2.7
China		6.3		5.8		1.5		6.5
Euro zone¹		0.7		-1.3		-10.0		5.0
Housing starts (thousands)
Canada		213		209		205		185
(% change)		-3.1		-2.0		-1.8		-9.8
U.S.		1,250		1,290		1,290		1,290
(% change)		3.9		3.2		0.0		0.0
Japan		942		905		790		790
(% change)		-2.3		-4.0		-12.7		0.0
Consumer price index
Canada (2002 = 100)		133.4		136.0		137.0		139.0
(% change)		2.3		1.9		0.7		1.5
Canadian interest rates (%)
3-month treasury bills		1.39		1.65		0.47		0.20
10-year government bonds		2.28		1.59		0.74		0.86
United States interest rates (%)
3-month treasury bills		1.97		2.10		0.37		0.15
10-year government bonds		2.91		2.14		0.86		0.98
Exchange rate (US cents / Canadian $)		77.2		75.4		74.2		76.1
British Columbia goods and services
Export price deflator (% change)		2.8		-2.8		-0.8		1.5

Euro zone (19) is Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia and Spain.

68 |

Fall 2020 Economic & Fiscal Update

This page intentionally left blank

Province Of British Columbia 18-K/AAnnual report (foreign governments) (amended)