Province Of British Columbia 18-K Annual report (foreign governments)

Exhibit 99.4

 

SECOND QUARTERLY REPORT

2023/24 FINANCIAL UPDATE,
ECONOMIC OUTLOOK&
SIX MONTH FINANCIAL RESULTS
APRIL - SEPTEMBER 2023

 

British Columbia Cataloguing in Publication Data

British Columbia. Ministry of Finance.

Quarterly report on the economy, fiscal situation and Crown corporations. — ongoing—

Quarterly.

Title on cover: Quarterly report.

Continues: British Columbia. Ministry of Finance.

Quarterly financial report. ISSN 0833-1375.

ISSN 1192-2176 — Quarterly Report on the economy, fiscal situation and Crown corporations.

1. Finance, Public — British Columbia — Accounting — Periodicals. 2. British Columbia — Economic conditions — 1945—             — Periodicals.*

3. Corporations, Government — British Columbia — Accounting — Periodicals. I. Title.

HJ13.B77     354.711'007231'05

2023/24 SECOND QUARTERLY REPORT
NOVEMBER 28, 2023 | TABLE OF CONTENTS

Part One — Updated Financial Forecast
Introduction		3
Revenue		5
Expense		8
Consolidated Revenue Fund (CRF) Spending		8
Service Delivery Agency Spending		9
Full-Time Equivalents for the BC Public Service		9
Provincial Capital Spending		10
Projects Over $50 Million		10
Provincial Debt		12
Risks to the Fiscal Forecast		14
Supplementary Schedules		15
Tables:
1.1	Forecast Update	3
1.2	Financial Forecast Changes	4
1.3	Comparison of Major Factors Underlying Revenue	6
1.4	Pandemic Recovery Contingencies	9
1.5	Capital Spending Update	10
1.6	Provincial Debt Update	12
1.7	Operating Statement	15
1.8	Revenue by Source	16
1.9	Expense by Ministry, Program and Agency	17
1.10	Expense by Function	18
1.11	Capital Spending	19
1.12	Capital Expenditure Projects Greater Than $50 million	20
1.13	Provincial Debt	24
1.14	Statement of Financial Position	25
1.15	Material Assumptions – Revenue	26
1.16	Material Assumptions – Expense	31
1.17	Full-Time Equivalents (FTEs)	34

Second Quarterly Report 2023/24   | i

Table Of Contents

Part Two — Economic Review and Outlook
Summary		35
British Columbia Economic Activity and Outlook		36
Labour Market		37
Consumer Spending and Inflation		38
Housing		40
Business and Government		43
External Trade and Commodity Markets		44
Demographics		45
Risks to the Economic Outlook		46
External Outlook		46
United States		46
Canada		49
Asia		51
Europe		51
Financial Markets		52
Interest Rates		52
Exchange Rate		54
Tables:
2.1	British Columbia Economic Indicators	36
2.2	U.S. Real GDP Forecast: Consensus versus B.C. Ministry of Finance	48
2.3	Canadian Real GDP Forecast: Consensus versus B.C. Ministry of Finance	50
2.4	Private Sector Canadian Interest Rate Forecasts	53
2.5	Private Sector Exchange Rate Forecasts	54
2.6.1	Gross Domestic Product (GDP): British Columbia	55
2.6.2	Selected Nominal Income and Other Indicators: British Columbia	56
2.6.3	Labour Market Indicators: British Columbia	56
2.6.4	Major Economic Assumptions	57
Topic Box:
Provincial Economic Accounts Update		59

 ii | Second Quarterly Report 2023/24  

PART 1 | UPDATED FINANCIAL FORECAST

Introduction

Table 1.1 2023/24 Forecast Update

($ millions)	Budget 2023			First Quarterly Report			Second Quarterly Report
Revenue		77,690			76,228			77,663
Expense		(80,206	)		(81,202	)		(81,520	)
Pandemic Recovery Contingencies		(1,000	)		(1,000	)		(1,000	)
Forecast allowance		(700	)		(700	)		(700	)
Deficit		(4,216	)		(6,674	)		(5,557	)
Capital Spending:
Taxpayer-supported capital spending		11,813			12,180			11,171
Self-supported capital spending		4,027			4,073			4,055
		15,840			16,253			15,226
Provincial Debt:
Taxpayer-supported debt		75,617			70,772			69,301
Self-supported debt		31,607			31,562			31,603
Total debt (including forecast allowance)		107,924			103,034			101,604
Taxpayer-supported debt-to-GDP ratio		18.9	%		17.6	%		17.0	%
Taxpayer-supported debt-to-revenue ratio		100.1	%		95.5	%		91.6	%

The Second Quarterly Report shows an improvement to the 2023/24 deficit forecast from $6.7 billion to $5.6 billion. The lower deficit forecast is mainly from income tax projections based on updated 2022 income tax assessment information from the Canada Revenue Agency, and expected federal government contributions towards the spending related to the recent wildfires.

Income tax revenue forecasts are based on delayed information from tax returns that are filed and assessed after a year has ended. These forecasts have been subject to higher than normal adjustments in an environment of uncertainties such as inflation, high interest rates, effects of the pandemic, and global developments. In September, the Province's projections for personal and corporate income tax revenue were revised downwards based on the preliminary 2022 tax assessment results, and the latest data shows more positive results.

Details of the revenue and expense forecast changes are shown in Table 1.2 and Chart 1.1.

(continued on page 5)

Second Quarterly Report 2023/24   | 3

Updated Financial Forecast

Table 1.2 2023/24 Financial Forecast Changes
	($ millions)
2023/24 deficit at Budget 2023 (February 28, 2023)	(4,216	)			(4,216	)
2023/24 deficit at the First Quarterly Report (September 27, 2023)			(6,674	)
	Q1		Q2		Total
	Update		Update		Changes
Revenue1 changes:
Personal income tax – changes based on preliminary 2022 tax assessment and improvement in 2023 household income	(522	)	551		29
Corporate income tax – gain in prior-year settlement payment, and increase in instalments reflecting revised outlook of 2023 national corporate taxable income	99		579		678
Provincial sales tax – higher 2022/23 carry forward and year-to-date sales activity	175		-		175
Property transfer tax – due to higher than expected sales results	151		-		151
Carbon tax – lower sales volume in most fuel types reflecting prior year and year-to-date results	(111	)	(50	)	(161	)
Tobacco tax – reflecting lower prior year and year-to-date sales results	(45	)	-		(45	)
Other taxation sources – mainly reflecting the impacts of the 2022/23 year-end and year-to-date results	122		(12	)	110
Natural gas royalties – changes in prices, volumes and utilization of royalty and infrastructure programs/credits, lower natural gas liquids royalties	(1,179	)	61		(1,118	)
Mining – lower production and changes in coal and copper prices	(174	)	(35	)	(209	)
Electricity sales under the Columbia River Treaty – lower Mid-C electricity prices	(44	)	(12	)	(56	)
Forests – mainly changes in stumpage rates and lower harvest volumes	40		(94	)	(54	)
Other natural resources – mainly changes in water rental revenues, lower petroleum royalties and rental tenure revenue	(23	)	(1	)	(24	)
Fees, licences, investment earnings and miscellaneous revenue:
Post-secondary institutions	36		157		193
Other sources – mainly lower vote recoveries related to interest from agencies	111		(100	)	11
Canada health and social transfers – mainly higher B.C. share of national population	282		134		416
Other federal government transfers – mainly changes in claims under the Disaster Financial Assistance Arrangements. Addition of 2023 wildfire claims offset by lower 2021 rainstorm claims	(383	)	260		(123	)
Commercial Crown corporation net income	3		(3	)	-
Total revenue changes	(1,462	)	1,435		(27	)
Less: expense1 increases (decreases):
Consolidated Revenue Fund changes:
Statutory spending:
Fire management costs	762		20		782
Housing Priority Initiatives Special Account	104		-		104
Other statutory spending	17		16		33
Refundable tax credits – mainly reflects preliminary 2022 tax assessment information	(81	)	(44	)	(125	)
Other expense changes – mainly higher interest costs	91		98		189
Spending recovered from external parties	(73	)	130		57
Changes in spending profile of service delivery agencies:
School districts	177		-		177
Universities	165		93		258
Colleges and institutes	152		30		182
Health authorities and hospital societies	1,170		1,450		2,620
Other service delivery agencies2	455		(28	)	427
(Increase) decrease in transfers to service delivery agencies - accounting elimination	(1,943	)	(1,447	)	(3,390	)
Total expense changes	996		318		1,314
Total changes	(2,458	)	1,117		(1,341	)
2023/24 deficit at the First Quarterly Report	(6,674	)
2023/24 deficit at the Second Quarterly Report			(5,557	)	(5,557	)

¹ Detailed descriptions of changes are provided in the revenue and expense sections of this report.

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

 4 | Second Quarterly Report 2023/24  

Updated Financial Forecast

Projected taxpayer-supported capital spending in 2023/24 is $11.2 billion, which is $1.0 billion lower than the First Quarterly Report, mainly due to timing of projects in the transportation sector. The self-supported capital spending forecast is $4.1 billion, with minimal changes from the First Quarterly Report.

As a result of higher revenues and lower capital spending forecast, taxpayer-supported debt at the end of 2023/24 is forecast at $69.3 billion, lower by $1.5 billion compared to the First Quarterly Report. The lower debt balance results in improved debt metrics, with B.C.'s taxpayer-supported debt-to-GDP ratio now forecast to be 17.0 per cent, and debt-to-revenue at 91.6 per cent.

Chart 1.1 2023/24 Deficit – Major Changes from the First Quarterly Report

Improvement of $1.1 billion

$ millions

Revenue

Revenue for 2023/24 is forecast to be $77.7 billion — $1.4 billion higher than the projection in the First Quarterly Report. The forecast for taxation revenues has increased by $1.1 billion, reflecting higher than expected 2022 income tax assessments and improved household income and wages growth. The remaining $300 million increase to revenue mainly reflects higher federal funding for wildfire spending under the Disaster Financial Assistance Arrangements, and increased Canada health and social transfers.

Detailed revenue projections are disclosed in Table 1.8, and key assumptions and sensitivities relating to revenue are provided in Table 1.15. An analysis on historical volatility of major economic drivers of revenue can be found in the 2023 British Columbia Financial and Economic Review (pages 17-18).

Second Quarterly Report 2023/24   | 5

Updated Financial Forecast

Table 1.3 Comparison of Major Factors Underlying Revenue

Calendar Year	Second Quarterly Report						First Quarterly Report
Per cent growth unless otherwise indicated	2022		2023		2024		2022		2023		2024
Real GDP		3.8		1.0		0.7		3.3		1.2		0.8
Nominal GDP		11.0		3.1		3.5		11.7		2.9		3.3
Household income		6.8		6.7		4.2		6.7		6.3		4.2
Wages and salaries		9.7		6.2		5.2		10.7		5.9		5.1
Corporations net operating surplus		9.3		-12.3		-6.6		20.8		-11.8		-9.1
Employment		3.2		1.4		0.6		3.2		1.1		0.8
Consumer expenditures on durable goods		2.2		2.1		0.6		-2.6		2.0		0.8
Consumer expenditures on goods and services		9.8		5.2		4.9		10.4		6.4		4.7
Business investment		7.9		4.8		4.6		12.7		4.0		4.8
Residential investment		1.0		5.2		3.7		8.6		3.3		3.5
Retail sales		3.1		0.7		2.2		3.1		2.4		2.5
Consumer Price Index		6.9		4.0		2.7		6.9		3.9		2.5
Residential sales value		-30.2		-9.5		11.8		-30.4		-11.6		16.9
B.C. Housing starts		-1.9		1.4		-9.3		-1.9		0.0		-9.8
U.S. Housing starts		-3.0		-10.5		-1.4		-3.0		-11.1		-2.5
SPF 2x4 price ($US/thousand board feet)	$	814	$	400	$	450	$	814	$	400	$	450
Exchange rate (US cents/Canadian dollar)		76.8		74.2		74.9		76.8		74.7		75.8
Fiscal Year	2022/23		2023/24		2024/25		2022/23		2023/24		2024/25
Natural gas price ($Cdn/GJ at plant inlet)	$	4.09	$	1.40	$	1.97	$	4.09	$	1.29	$	2.03
Bonus bid average bid price per hectare ($)	$	0	$	200	$	200	$	0	$	200	$	200
Electricity price ($US/mega-watt hour, Mid-C)	$	85	$	89	$	92	$	85	$	93	$	90
Metallurgical coal price ($US/tonne, fob Australia)	$	322	$	249	$	223	$	322	$	248	$	222
Copper price ($US/lb)	$	3.87	$	3.80	$	3.90	$	3.87	$	3.82	$	3.96
Average stumpage rates ($Cdn/cubic metre)	$	38.05	$	18.45	$	18.92	$	38.05	$	19.04	$	19.42
Crown harvest volumes (million cubic metres)		37.2		34.0		34.0		37.2		38.0		38.0

The major changes from the First Quarterly Report forecast include the following:

Income Tax Revenues

The personal income tax revenue forecast is up $551 million due to stronger 2022 preliminary tax assessment information, and slightly improved 2023 household income. The forecast reflects a prior year impact of $352 million and a $199 million on-going base effect.

Corporate income tax revenue is up $579 million mainly reflecting stronger preliminary assessments of the 2022 corporate income tax results. The forecast includes a higher prior year settlement payment of $414 million and an improvement of $165 million in advance instalment payments from the federal government.

Other Tax Revenues

Carbon tax revenues are down $50 million due to the impacts of lower year-to-date sales volumes on major fuel types.

Fuel tax revenues are down $12 million due to the impact of lower year-to-date sales volumes.

 6 | Second Quarterly Report 2023/24  

Updated Financial Forecast

Natural Resource Revenue

Revenue from natural gas royalties is up $61 million mainly due to higher natural gas prices and increased production volumes, partially offset by increased utilization of royalty program credits. The updated natural gas price forecast is $1.40 ($Cdn/gigajoule, plant inlet), up from the First Quarterly Report estimate ($1.29). Prices remain significantly lower than the Budget 2023 forecast of $3.04.

Revenue from coal, metals, minerals and other mining-related sources is down $35 million mainly due to lower coal production volume and year-to-date mineral tax instalment payments.

Forest revenue is down $94 million mainly due to lower harvest volumes which have resulted in lower BC Timber Sales and timber tenures stumpage revenue. Harvest volumes of Crown land timber are forecast to be 34 million cubic metres, down 4 million cubic metres from the First Quarterly Report. Total stumpage rates are forecast to be $18.45 Cdn/cubic metre in 2023/24, down from the First Quarterly Report estimate ($19.04).

Revenue from other natural resources is down $13 million mainly due to lower revenue from electricity sales under the Columbia River Treaty reflecting lower Mid-Columbia electricity prices. Mid-Columbia electricity prices are forecast to be $89.30 ($US/mega-watt hours) in 2023/24, down from the First Quarterly Report estimate ($92.90).

Other Revenue

Other revenue consists of revenue from fees, licences, investment earnings and miscellaneous sources. These revenue sources are now expected to total $10.7 billion, up $57 million from the First Quarterly Report. The updated forecast for fee revenues totals $5.3 billion, up $44 million mainly due to higher projections from health authorities. The revised forecast for investment earnings is $1.3 billion, down $103 million mainly due to lower interest recoveries from agencies to reflect the adoption of changes in accounting standards related to financial instruments, as well as lower expected investment incomes for universities. The lower vote recovery funding has an equal and offsetting expense decrease. The miscellaneous revenue outlook of $4.1 billion is up $116 million mainly due to increased projections from universities.

Federal Government Transfers

Federal government contributions are expected to be $13.9 billion, up $394 million.

Canada health and social transfers have increased by $134 million mainly due to an improved B.C. share of the national population, reflecting the most recent analysis of 2021 census population data. The changes to the estimates include $55 million related to the 2022/23 fiscal year and $79 million related to 2023/24.

Second Quarterly Report 2023/24   | 7

Updated Financial Forecast

Other federal government contributions are up $260 million mainly reflecting higher funding in support of Disaster Financial Assistance Arrangements consistent with spending forecasts, and higher transfers for the SUCH¹ sector entities. Funding in support of Disaster Financial Assistance Arrangements increased $237 million reflecting $358 million funding for 2023 wildfires, partly offset by revised spending forecasts for other events.

Commercial Crown Corporations

The BC Lottery Corporation's net income² forecast is $14 million lower due to reduced revenue from online gaming and casino revenue. This is partly offset by higher net income of the Liquor Distribution Branch.

Expense

The Second Quarterly Report expense forecast for 2023/24 is $318 million higher than the First Quarterly Report mainly due to higher spending recovered from external revenues, increased debt servicing costs and higher net spending by service delivery agencies.

Consolidated Revenue Fund (CRF) Spending

Total statutory spending is projected to be mainly unchanged since the First Quarterly Report due to the following updates:

· $20 million higher for fire management costs - total spending forecast remains at historic high of $986 million;

· $16 million increase in various other statutory spending; offset by

· $44 million lower refundable tax credits.

Other changes in CRF spending are mainly due to $100 million higher debt servicing costs as a result of higher interest rates.

Contingencies

Budget 2023 includes a Contingencies vote of $5.5 billion in 2023/24, with $1.0 billion in the Pandemic Recovery sub-vote, $2.2 billion allocated to Shared Recovery Mandate, and $2.3 billion allocated to General Programs, CleanBC and Climate & Emergency Response. Contingencies help fund unexpected costs such as flood recovery, increased costs for government services, and emerging priorities. These total allocations remain unchanged in the Second Quarterly Report.

1	SUCH: School districts, universities, colleges and institutes, and health organizations.
2	Net of payments to the federal government and payments to the BC First Nations Gaming Revenue Sharing Limited Partnership in accordance with section 14.3 of the Gaming Control Act (B. C.).

 8 | Second Quarterly Report 2023/24  

Updated Financial Forecast

Table 1.4 provides a forecast on the notional allocations of the Province's pandemic measures as of September 30, 2023.

Table 1.4 2023/24 Pandemic Recovery Contingencies
	Updated Forecast
$ millions	Q1		Q2
Initiative
Health COVID-19 Management		875		875
Supports for Vulnerable Populations		20		20
Tourism Initiative Envelope		20		20
Unallocated: available for additional health or recovery measures		85		85
Total		1,000		1,000

Spending Recovered from External Revenues

Expenses funded by third parties are forecast to increase by $130 million. This is mainly due to transfers to First Nations as part of natural resources revenue-sharing agreements, partly offset by lower interest expense recoveries from commercial Crown corporations.

Operating Transfers to Service Delivery Agencies

Operating transfers to service delivery agencies are forecast to be $1.4 billion higher than the First Quarterly Report mainly due to higher allocations to health organizations. These additional transfers generally do not represent incremental government spending; they are reallocations of ministries' existing budgets to better reflect funding to service delivery agencies. These funding increases are related to spending forecast changes noted below.

Service Delivery Agency Spending

Service delivery agency expenses are forecast to increase by $1.5 billion in 2023/24 compared to the First Quarterly Report.

· Post-secondary sector expenses are forecast to increase by $123 million mainly due to in-year wage ratifications, including retroactive settlements, and higher operating costs.

· The health authority and hospital society expense forecast increased by $1.4 billion to fully reflect salary increases under the Shared Recovery Mandate, expected pandemic related costs, and increased spending to improve health care services.

· Other service delivery agency spending is forecast to be $28 million lower due to various updates across a number of agencies.

Detailed expense projections are in Table 1.9. Key spending assumptions and sensitivities are provided in Table 1.16.

Full-Time Equivalents for the BC Public Service

The projection of full-time equivalent (FTE) staff utilization for 2023/24 is 36,200, an increase of 700 FTEs since the First Quarterly Report. These FTEs reflect the response to a significant wildfire season. The growth is also related to continued implementation of key government priorities (such as natural resource sector initiatives) and caseload driven programs such as children and family services and justice and public safety.

Second Quarterly Report 2023/24   | 9

Updated Financial Forecast

Provincial Capital Spending

Capital spending is projected to total $15.2 billion in 2023/24 — $1.0 billion lower than the forecast in the First Quarterly Report (see Tables 1.5 and 1.11).

Taxpayer-supported capital spending is projected at $11.2 billion. The $1.0 billion decrease since the First Quarterly Report is primarily due to changes in the timing of capital spending in the transportation sector.

These changes do not represent a reduction in capital spending; rather the spending has been shifted to future years within the provincial capital plan.

Table 1.5 2023/24 Capital Spending Update
	($ millions)
	Q1			Q2			Total
	Update			Update			Changes
Taxpayer-supported capital spending at Budget 2023		11,813						11,813
Taxpayer-supported capital spending at the First Quarterly Report					12,180
School districts		(29	)		(36	)		(65	)
Post-secondary institutions		(33	)		19			(14	)
Health sector		288			(35	)		253
Transportation sector		(3	)		(909	)		(912	)
Social housing		133			(36	)		97
Other net adjustments to capital schedules		11			(12	)		(1	)
Total taxpayer-supported changes		367			(1,009	)		(642	)
Taxpayer-supported capital spending - updated forecast		12,180			11,171			11,171
Self-supported capital spending at Budget 2023		4,027						4.027
Self-supported capital spending at the First Quarterly Report					4,073
BC Hydro		46			-			46
BC Lottery Corporation		-			(18	)		(18	)
Total self-supported changes		46			(18	)		28
Self-supported capital spending - updated forecast		4,073			4,055			4,055
2023/24 capital spending at the First Quarterly Report		16,253
2023/24 capital spending at the Second Quarterly Report					15,226			15,226

At $4.1 billion, self-supported capital spending is $18 million lower than the First Quarterly Report, primarily due to changes in the timing of BC Lottery Corporation expenditures.

Projects Over $50 Million

Capital spending on projects greater than $50 million is presented in Table 1.12. Eight projects have been added to the table since the First Quarterly Report:

· Nanaimo Long-Term Care ($286 million);

· St. Paul's Hospital Clinical Support and Research Centre ($638 million);

· University Hospital of Northern BC Redevelopment – Phase 1 (Site Preparation) ($103 million);

· Highway 1 Corridor – Nicomen Bridge ($144 million);

· Highway 95 Bridge Replacement ($90 million);

· Highway 1 Fraser Valley Corridor Improvements 264th St. to Mount Lehman Rd. ($2,340 million);

 10 | Second Quarterly Report 2023/24  

Updated Financial Forecast

· Highway 1 Fraser Valley Corridor Improvements Mount Lehman Rd. to Highway 11 Site Preparation ($100 million); and

· BC Hydro – Burrard switchyard - control building upgrade project ($57 million).

Since the First Quarterly Report, three projects have been completed and are no longer listed in the table:

· Capilano University – New Squamish Campus;

· BC Hydro – UBC load increase stage 2 project; and

· BC Hydro – Mount Lehman substation upgrade project.

Changes for existing projects since the First Quarterly Report include:

· British Columbia Institute of Technology – Student Housing project's anticipated total cost increased from $120 million to $140 million due to additional shoring costs. Internal borrowing increased from $108 million to $128 million;

· Royal Roads University – West Shore Learning Centre project's year of completion was amended from 2024 to 2025 to align with revised project schedule;

· Simon Fraser University – Student Housing project's anticipated total cost increased from $108 million to $111 million to reflect the final budget. Contributions from other funding sources increased by $3 million to $38 million;

· Burnaby Hospital Redevelopment – Phase 1 project's year of completion was amended from 2027 to 2028 due to revised project scope;

· Centre for Children and Youth Living with Health Complexity project's anticipated total cost increased from $222 million to $267 million to reflect revised project budget. Internal borrowing increased from $193 million to $224 million and contributions from other sources increased from $29 million to $43 million;

· FW Green Long-Term Care project's name was updated to Dr. F.W. Green Memorial Home;

· Nanaimo Regional General Hospital – ICU/HAU Redevelopment project's year of completion was amended from 2024 to 2025 to align with revised project schedule;

· New Surrey Hospital and BC Cancer Centre project's year of completion was amended from 2027 to 2029 to align with revised project schedule. The project's anticipated total cost increased from $1.724 billion to $2.881 billion to reflect the updated post-tender budget. Internal borrowing increased from $1.664 billion to $2.816 billion and contributions from other sources increased from $60 million to $65 million;

· Vancouver General Hospital – Operating Rooms Renewal – Phase 1 project's anticipated total cost decreased from $102 million to $101 million to reflect the final budget. Internal borrowing decreased from $35 million to $34 million;

· West Fraser Road Realignment project's anticipated total costs decreased from $103 million to $94 million to reflect revised budget. Internal borrowing decreased from $103 million to $94 million;

· Highway 7 Widening – 266th St. to 287th St. project's anticipated total cost increased from $106 million to $130 million to reflect revised project budget. Internal borrowing increased from $77 million to $101 million;

· Highway 1 216th St. to 264th St. widening project's year of completion was amended from 2025 to 2026 to align with revised project schedule;

Second Quarterly Report 2023/24 | 11

Updated Financial Forecast

· BC Hydro – 5L063 Telkwa relocation project's anticipated total cost decreased from $66 million to $53 million due to lower cost of transmission line and access road works;

· BC Hydro – Peace Region Electricity Supply (PRES) project's financing sources were amended to recognize $58 million contribution from the Federal Government. Internal borrowing decreased from $219 million to $161 million;

· BC Hydro – Various Sites - NERC Critical Infrastructure Protection implementation project for cyber assets anticipated total cost of $60 million decreased to $56 million due to lower contractor labour costs;

· BC Hydro – Natal - 60-138 kV switchyard upgrade project's anticipated cost increased from $84 million to $101 million due to equipment supply challenges, higher inflation, and additional archaeological work; and

· BC Hydro – Treaty Creek Terminal - Transmission Load Interconnection (KSM) project's anticipated year of completion was amended from 2026 to 2027 due to a change in procurement strategy, geotechnical challenges, and design changes during site preparation work.

Provincial Debt

The provincial debt, including a $700 million forecast allowance, is projected to total $101.6 billion by the end of the fiscal year — $1.4 billion lower than the forecast in the First Quarterly Report primarily due to higher revenues and lower capital spending.

Table 1.6 2023/24 Provincial Debt Update ¹

	($ millions)
	Q1 Update			Q2 Update			Total Changes
Taxpayer-supported debt forecast at Budget 2023		75,617						75,617
Taxpayer-supported debt at the First Quarterly Report					70,772
Changes:
Lower debt level from 2022/23		(3,767	)		-			(3,767	)
Changes in operating results (before forecast allowance)		2,458			(1,117	)		1,341
Non-cash items		57			(77	)		(20	)
Changes in cash balances 2		(3,760	)		(1,011	)		(4,771	)
Changes in other working capital balances 3		(200	)		1,743			1,543
Taxpayer-supported capital spending		367			(1,009	)		(642	)
Total taxpayer-supported changes		(4,845	)		(1,471	)		(6,316	)
Taxpayer-supported debt - updated forecast		70,772			69,301			69,301
Self-supported debt forecast at Budget 2023		31,607						31,607
Self-supported debt at the First Quarterly Report					31,562
Changes:
Lower debt level from 2022/23		(296	)		-			(296	)
Changes in capital spending		46			(18	)		28
Changes in internal financing		205			59			264
Total self-supported changes		(45	)		41			(4	)
Self-supported debt - updated forecast		31,562			31,603			31,603
Forecast allowance		700			700			700
2023/24 provincial debt forecast at the First Quarterly Report		103,034
2023/24 provincial debt forecast at the Second Quarterly Report					101,604			101,604

¹ 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.

² Reflects changes in cash balances at April 1, 2023 and includes all cash balances from the Consolidated Revenue Fund, School Districts, Universities, Colleges, Health Authorities, Hospital Societies and other taxpayer-supported agencies.

³ Changes in other working capital balances include changes in accounts receivables, accounts payable, accrued liabilities, deferred revenue, investments, restricted assets and other assets.

12 | Second Quarterly Report 2023/24

Updated Financial Forecast

Taxpayer-supported debt is forecast to be $69.3 billion at the end of 2023/24 — $1.5 billion lower than the forecast in the First Quarterly Report. The reduction reflects a $1.2 billion improvement in operating results (excluding non-cash items), and $1.0 billion lower capital spending, offset by a $732 million net change of cash and other working capital balances.

The lower debt forecast has resulted in a 0.6 percentage point reduction in the taxpayer-supported debt-to-GDP ratio since the First Quarterly Report; it is now forecast to end the year at 17.0 per cent. The taxpayer-supported debt-to-revenue ratio is forecast to end the fiscal year at 91.6 per cent — 3.9 percentage points lower than forecast in the First Quarterly Report.

Self-supported debt is forecast to be $31.6 billion at the end of 2023/24, with minimal changes from the First Quarterly Report.

The forecast allowance remains unchanged at $700 million.

B.C.'s taxpayer-supported debt is expected to increase by $9.4 billion over the year. However, the Province is able to borrow at low interest rates, with debt affordability remaining at levels that are lower than they have been historically. The Province's taxpayer-supported interest bite is forecast at 3.0 cents per dollar of revenue, as shown in Chart 1.2.

Chart 1.2 Debt Affordability

Interest bite for Taxpayer-Supported Debt
(cents per dollar of revenue) ¹

 

¹ The ratio of interest costs (less sinking fund interest) to revenue. Figures include capitalized interest expense in order to provide a more comparable measure to outstanding debt.

Further details on provincial debt are shown in Table 1.13.

Total provincial debt is presented consistent with the Debt Summary Report included in the Public Accounts. Debt is shown net of sinking fund investments and unamortized discounts, excludes accrued interest, and includes non-guaranteed debt directly incurred by commercial Crown corporations and debt guaranteed by the Province. The reconciliation between provincial debt and the financial statement debt is shown in Table 1.14.

Second Quarterly Report 2023/24 | 13

Updated Financial Forecast

Risks to the Fiscal Forecast

The main risks to B.C.'s economic and fiscal forecast include persistent price pressures leading to higher than anticipated interest rates for longer, as well as weaker global demand. Other risks include climate change impacts, housing affordability, volatility in commodity and financial markets, and the evolution of international geopolitical conflicts.

Personal and corporate income tax assessments take over a year to finalize. For example, the 2022 tax year will not be finalized until March 2024. Property transfer tax and provincial sales tax revenues are impacted by the number of residential transactions, average home sale prices and the amount of taxable purchases of goods and services. Natural resource revenues are affected by international commodity prices, and the health of B.C.'s major trading partners. These and other factors affecting own source revenues are a source of risk and may result in changes to the current forecast.

The spending forecast contained in the fiscal plan is based on ministry and service delivery agency plans. Risks include changes in planning assumptions such as demand for government services in the health care, education, and community social services sectors, as well as costs associated with fighting forests fires and responding to floods and other natural disasters.

Capital spending may be influenced by several factors including the cost of construction materials, design development, procurement activity, weather, geotechnical conditions and interest rates. Risks associated with operating results and capital spending could also affect debt levels.

As a result of these uncertainties, the actual operating result, capital spending and debt figures may differ from the current forecast. Government will update the fiscal outlook in the third quarterly report.

The potential fiscal impacts from these risks may be partly offset by the prudence incorporated in the updated forecast, including the $5.5 billion Contingencies vote allocation and the $700 million forecast allowance.

14 | Second Quarterly Report 2023/24

Updated Financial Forecast

Supplementary Schedules

The following tables provide the financial results for the six months ended September 30, 2023 and the 2023/24 full-year forecast.

Table 1.7 2023/24 Operating Statement

	Year-to-Date to September 30												Full Year
	2023/24									Actual			2023/24									Actual
($ millions)	Budget			Actual			Variance			2022/23 1			Budget			Forecast			Variance			2022/23
Revenue		38,346			38,520			174			39,635			77,690			77,663			(27	)		81,536
Expense		(35,399	)		(37,886	)		(2,487	)		(32,631	)		(81,206	)		(82,520	)		(1,314	)		(80,832	)
Surplus (deficit) before forecast allowance		2,947			634			(2,313	)		7,004			(3,516	)		(4,857	)		(1,341	)		704
Forecast allowance		-			-			-			-			(700	)		(700	)		-			-
Surplus (deficit)		2,947			634			(2,313	)		7,004			(4,216	)		(5,557	)		(1,341	)		704
Accumulated surplus (deficit) beginning of the year before remeasurement gains and losses		8,355			2,905			(5,450	)		2,211			8,355			2,905			(5,450	)		2,201
Adjustments to accumulated surplus (deficit) 1		-			903			903			645			-			-			-			-
Accumulated surplus (deficit) before remeasurement gains and losses		11,302			4,442			(6,860	)		9,860			4,139			(2,652	)		(6,791	)		2,905
Effect of remeasurement gains and (losses)		(836	)		(226	)		610			(241	)		(836	)		(202	)		634			(202	)
Accumulated surplus (deficit) end of period		10,466			4,216			(6,250	)		9,619			3,303			(2,854	)		(6,157	)		2,703

¹ Restated to reflect government's current accounting policies.

Second Quarterly Report 2023/24 | 15

Updated Financial Forecast

Table 1.8 2023/24 Revenue by Source

	Year-to-Date to September 30												Full Year
	2023/24									Actual			2023/24							Actual
($ millions)	Budget			Actual			Variance			2022/23 1			Budget		Forecast		Variance			2022/23
Taxation
Personal income		7,884			7,628			(256	)		7,594			15,953		15,982		29			17,268
Corporate income		4,614			4,482			(132	)		6,392			5,938		6,616		678			9,156
Employer health		1,366			1,375			9			1,186			2,731		2,750		19			2,720
Sales 2		5,081			5,354			273			4,901			10,187		10,362		175			9,818
Fuel		513			513			-			538			1,072		1,030		(42	)		1,021
Carbon		1,301			1,211			(90	)		1,016			2,811		2,650		(161	)		2,161
Tobacco		320			300			(20	)		355			565		520		(45	)		531
Property		1,729			1,773			44			1,561			3,488		3,591		103			3,253
Property transfer		969			1,206			237			1,478			1,799		1,950		151			2,293
Insurance premium		390			404			14			353			780		810		30			804
		24,167			24,246			79			25,374			45,324		46,261		937			49,025
Natural resource
Natural gas royalties		1,008			377			(631	)		1,056			2,016		898		(1,118	)		2,255
Forests		358			327			(31	)		916			846		792		(54	)		1,887
Other natural resource revenues 3		932			816			(116	)		1,131			1,902		1,613		(289	)		2,056
		2,298			1,520			(778	)		3,103			4,764		3,303		(1,461	)		6,198
Other revenue
Post-secondary education fees		1,054			1,098			44			1,009			2,770		2,832		62			2,651
Fees and licenses 4		1,077			1,158			81			1,081			2,412		2,475		63			2,277
Investment earnings		741			892			151			632			1,349		1,306		(43	)		1,316
Miscellaneous 5		1,732			2,341			609			1,999			3,989		4,111		122			4,445
		4,604			5,489			885			4,721			10,520		10,724		204			10,689
Contributions from the federal government
Health and social transfers		4,485			4,760			275			4,450			8,970		9,386		416			8,769
Other federal government contributions 6		1,425			1,052			(373	)		1,145			4,623		4,500		(123	)		3,757
		5,910			5,812			(98	)		5,595			13,593		13,886		293			12,526
Commercial Crown corporation net income
BC Hydro		98			68			(30	)		92			712		712		-			360
Liquor Distribution Branch		598			612			14			626			1,150		1,157		7			1,199
BC Lottery Corporation 7		688			682			(6	)		800			1,456		1,442		(14	)		1,584
ICBC 8		(61	)		(12	)		49			(770	)		-		-		-			(197	)
Other 9		44			103			59			94			171		178		7			152
		1,367			1,453			86			842			3,489		3,489		-			3,098
Total revenue		38,346			38,520			174			39,635			77,690		77,663		(27	)		81,536

1	Restated to reflect government's current accounting policies.
2	Includes provincial sales tax and HST/PST housing transition tax related to prior years.
3	Columbia River Treaty, other energy and minerals, water rental and other resources.
4	Healthcare-related, motor vehicle, and other fees.
5	Includes reimbursements for health care and other services provided to external agencies, and other recoveries.
6	Includes contributions for health, education, community development, housing and social service programs, and transportation projects.
7	Net of payments to the federal government and payments to the BC First Nations Gaming Revenue Sharing Limited Partnership in accordance with section 14.3 of the Gaming Control Act (B.C.).
8	2022/23 full year actual does not include non-controlling interest and will be restated in future quarterly reports to reflect the adoption of IFRS 9 and IFRS 17.
9	Includes Columbia Power Corporation, BC Railway Company, Columbia Basin power projects, and post-secondary institutions' self-supported subsidiaries.

16 | Second Quarterly Report 2023/24

Updated Financial Forecast

Table 1.9 2023/24 Expense by Ministry, Program and Agency

	Year-to-Date to September 30										Full Year
		2023/24						Actual			2023/24							Actual
($ millions)		Budget		Actual		Variance		2022/23 1				Budget		Forecast		Variance		2022/23
Office of the Premier		8		7		(1	)		7			16		16		-			14
Agriculture and Food		61		56		(5	)		99			112		124		12			292
Attorney General		375		394		19			392			773		777		4			807
Children and Family Development		988		1,071		83			830			1,912		1,912		-			1,743
Citizens' Services		314		357		43			314			683		683		-			768
Education and Child Care		4,514		4,677		163			4,179			8,874		8,874		-			8,233
Emergency Management and Climate Readiness		40		65		25			165			101		101		-			821
Energy, Mines and Low Carbon Innovation		43		102		59			41			129		134		5			399
Environment and Climate Change Strategy		130		224		94			246			255		266		11			574
Finance		792		812		20			334			1,578		1,682		104			4,059
Forests		529		979		450			557			925		1,707		782			1,190
Health		13,172		14,328		1,156			12,210			28,674		28,674		-			26,385
Housing		447		438		(9	)		413			897		897		-			897
Indigenous Relations and Reconciliation		63		98		35			160			188		188		-			777
Jobs, Economic Development and Innovation		48		50		2			50			113		113		-			225
Labour		10		20		10			10			21		21		-			34
Mental Health and Addictions		9		9		-			6			27		27		-			198
Municipal Affairs		250		219		(31	)		271			269		269		-			1,923
Post-Secondary Education and Future Skills		1,411		1,641		230			1,309			2,770		2,770		-			2,691
Public Safety and Solicitor General		510		509		(1	)		462			1,028		1,028		-			1,126
Social Development and Poverty Reduction		2,333		2,390		57			2,208			4,745		4,745		-			4,689
Tourism, Arts, Culture and Sport		105		95		(10	)		113			182		182		-			427
Transportation and Infrastructure		505		505		-			479			1,021		1,021		-			2,044
Water, Land and Resource Stewardship		53		247		194			68			124		124		-			464
Total ministries and Office of the Premier		26,710		29,293		2,583			24,924			55,417		56,335		918			60,780
Management of public funds and debt		602		712		110			661			1,309		1,500		191			1,314
Contingencies - Shared Recovery Mandate		-		-		-			-			2,200		2,200		-			-
Contingencies - General programs, CleanBC and Climate & Emergency Response		-		-		-			-			2,300		2,300		-			1
Pandemic Recovery Contingencies		-		-		-			247			1,000		1,000		-			-
Funding for capital expenditures		1,279		1,071		(208	)		665			4,540		4,350		(190	)		2,248
Refundable tax credit transfers		1,492		1,462		(30	)		1,030			3,159		3,034		(125	)		3,920
Legislative Assembly and other appropriations		104		98		(6	)		81			214		216		2			181
Total appropriations		30,187		32,636		2,449			27,608			70,139		70,935		796			68,444
Elimination of transactions between appropriations 2		-		(16	)	(16	)		(9	)		(32	)	(35	)	(3	)		(24	)
Prior year liability adjustments		-		-		-			-			-		-		-			(98	)
Consolidated revenue fund expense		30,187		32,620		2,433			27,599			70,107		70,900		793			68,322
Expenses recovered from external entities		1,906		1,927		21			1,616			4,909		4,966		57			4,919
Elimination of funding provided to service delivery agencies		(19,564	)	(19,518	)	46			(16,842	)		(41,212	)	(44,412	)	(3,200	)		(38,236	)
Total direct program spending		12,529		15,029		2,500			12,373			33,804		31,454		(2,350	)		35,005
Service delivery agency expense
School districts		3,601		3,645		44			3,333			8,356		8,533		177			7,933
Universities		3,002		3,106		104			2,840			6,369		6,627		258			6,053
Colleges and institutes		767		806		39			747			1,574		1,756		182			1,591
Health authorities and hospital societies		11,628		11,702		74			10,150			22,645		25,265		2,620			22,814
Other service delivery agencies		3,872		3,598		(274	)		3,188			8,458		8,885		427			7,436
Total service delivery agency expense		22,870		22,857		(13	)		20,258			47,402		51,066		3,664			45,827
Total expense		35,399		37,886		2,487			32,631			81,206		82,520		1,314			80,832

¹ Restated to reflect governments current organization and accounting policies.

² Reflects payments made under an agreement where an expense from a voted appropriation is recorded as revenue by a special account.

Second Quarterly Report 2023/24 | 17

Updated Financial Forecast

Table 1.10 2023/24 Expense by Function

	Year-to-Date to September 30									Full Year
	2023/24								Actual	2023/24						Actual
($ millions)	Budget		Actual		Variance			2022/231		Budget		Forecast	Variance			2022/23
Health 2		14,379		15,833		1,454			13,301		30,927	31,120		193			30,322
Education 3		7,898		8,183		285			7,432		17,600	17,862		262			16,991
Social services		4,431		4,461		30			3,633		9,158	9,138		(20	)		9,652
Protection of persons and property		1,120		1,172		52			1,226		2,324	2,326		2			3,483
Transportation		1,209		1,115		(94	)		1,054		2,616	2,660		44			3,319
Natural resources and economic development		1,925		2,771		846			1,947		4,432	5,419		987			6,284
Other		2,001		1,740		(261	)		1,463		3,485	3,423		(62	)		5,736
Contingencies - Shared Recovery Mandate		-		-		-			-		2,200	2,200		-			-
Contingencies - General programs, CleanBC and Climate & Emergency Response 4		-		-		-			-		2,300	2,300		-			-
Pandemic Recovery Contingencies 4		-		-		-			247		1,000	1,000		-			-
General government		906		1,003		97			881		1,929	1,815		(114	)		2,326
Debt servicing		1,530		1,608		78			1,447		3,235	3,257		22			2,719
Total expense		35,399		37,886		2,487			32,631		81,206	82,520		1,314			80,832

1	Restated to reflect government's current organization and accounting policies.
2	Payments for healthcare services by the Ministry of Social Development and Poverty Reduction and the Ministry of Children and Family Development made on behalf of their clients are reported in the Health function.
3	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	Contingencies for the prior fiscal year are reported in the relevant functions; the current year forecast is not yet allocated to functions.

18 | Second Quarterly Report 2023/24

Updated Financial Forecast

Table 1.11 2023/24 Capital Spending

	Year-to-Date to September 30									Full Year
	2023/24							Actual		2023/24							Actual
($ millions)	Budget		Actual		Variance			2022/231		Budget		Forecast		Variance			2022/23
Taxpayer-supported
Education
School districts		506		393		(113	)		464		1,019		954		(65	)		934
Post-secondary institutions		684		558		(126	)		427		1,716		1,702		(14	)		1,071
Health		816		719		(97	)		482		3,243		3,496		253			1,915
BC Transportation Financing Authority		2,148		1,236		(912	)		992		3,947		3,043		(904	)		1,823
BC Transit		144		49		(95	)		62		232		224		(8	)		100
Government ministries		224		199		(25	)		150		701		699		(2	)		470
Social housing 2		358		323		(35	)		158		808		905		97			357
Other		45		56		11			26		147		148		1			85
Total taxpayer-supported		4,925		3,533		(1,392	)		2,761		11,813		11,171		(642	)		6,755
Self-supported
BC Hydro		2,206		2,370		164			1,883		3,815		3,861		46			3,919
Columbia Basin power projects 3		4		3		(1	)		3		9		9		-			10
BC Railway Company		4		2		(2	)		3		7		7		-			6
ICBC		36		35		(1	)		24		65		65		-			41
BC Lottery Corporation 4		39		27		(12	)		21		103		85		(18	)		95
Liquor Distribution Branch		13		4		(9	)		5		28		28		-			16
Other 5		-		-		-			-		-		-		-			78
Total self-supported		2,302		2,441		139			1,939		4,027		4,055		28			4,165
Total capital spending		7,227		5,974		(1,253	)		4,700		15,840		15,226		(614	)		10,920

¹ Taxpayer-supported figures have been restated to reflect government's current accounting policies.

² Includes BC Housing Management Commission and Provincial Rental Housing Corporation.

³ Joint ventures of the Columbia Power Corporation and Columbia Basin Trust.

⁴ Excludes right-of-use assets except for full year actual.

⁵ Includes post-secondary institutions' self-supported subsidiaries.

Second Quarterly Report 2023/24 | 19

Updated Financial Forecast

Table 1.12 Capital Expenditure Projects Greater Than $50 million ¹

Note: Information in bold type denotes changes from the 2023/24 First Quarterly Report released on September 27, 2023.

			Project		Estimated		Anticipated		Project Financing
($ millions)	Year of Completion		Cost to Sept. 30, 2023		Cost to Complete		Total Cost		Internal/ Borrowing		P3 Liability		Federal Gov't		Other Contrib'ns
Schools
Centennial Secondary 2		2017		59		2		61		61		-		-		-
Grandview Heights Secondary 2		2021		78		5		83		63		-		-		20
New Westminster Secondary 2		2021		94		13		107		107		-		-		-
Handsworth Secondary 2		2022		66		3		69		69		-		-		-
Pexsisen Elementary and Centre Mountain Lellum Middle 2		2022		88		1		89		89		-		-		-
Quesnel Junior School 2		2022		47		5		52		52		-		-		-
Stitó:s Lá:lém totí:lt Elementary Middle School 2		2022		52		2		54		49		-		-		5
Coast Salish Elementary 3		2023		24		19		43		38		-		-		5
Burnaby North Secondary		2024		99		9		108		99						9
Cowichan Secondary		2024		44		42		86		84		-		-		2
Eric Hamber Secondary		2024		75		31		106		94		-		-		12
Victoria High School		2024		82		18		100		97		-		-		3
North East Latimer Elementary		2025		-		52		52		52		-		-		-
Burke Mountain Secondary		2026		7		153		160		135		-		-		25
Carson Elementary		2026		-		61		61		61		-		-		-
New East Side Elementary		2026		-		59		59		59		-		-		-
New Cloverley Elementary		2026		-		64		64		61		-		-		3
Pineview Valley Elementary		2026		-		65		65		65		-		-		-
George Pringle Secondary (formerly Westside Secondary)		2027		7		99		106		103		-		-		3
La Vallée (Pemberton) Elementary		2027		-		66		66		66		-		-		-
Prince Rupert Middle		2027		-		127		127		127		-		-		-
Guildford Park Secondary		2028		-		65		65		60		-		-		5
Tamanawis Secondary		2028		-		57		57		52		-		-		5
Seismic mitigation program 4		2030		1,426		600		2,026		2,026		-		-		-
Total schools				2,248		1,618		3,866		3,769		-		-		97
Post-secondary institutions
Simon Fraser University – Student Housing 2		2023		110		1		111		73		-		-		38
University of Victoria – Student Housing 2		2023		220		16		236		128		-		-		108
Capilano University – Student Housing		2024		6		52		58		41		-		-		17
Okanagan College – Student Housing		2024		25		50		75		74		-		-		1
British Columbia Institute of Technology – Student Housing		2025		45		95		140		128		-		-		12
North Island College – Student Housing		2025		8		70		78		76		-		-		2
The University of British Columbia
– School of Biomedical Engineering		2025		51		88		139		25		-		-		114
Royal Roads University – West Shore Learning Centre		2025		41		65		106		80		-		-		26
University of the Fraser Valley – Student Housing		2025		1		74		75		63		-		-		12
University of Victoria
– Engineering and Computer Science Building Expansion		2026		5		128		133		97		-		-		36
Vancouver Island University – Student Housing and Dining		2026		-		88		88		87		-		-		1
British Columbia Institute of Technology
– Trades and Technology Complex		2027		2		176		178		152		-		-		26
Douglas College – Academic and Student Housing		2027		5		288		293		203		-		-		90
Vancouver Community College
– Centre for Clean Energy & Automotive Innovation		2027		-		291		291		271		-		-		20
Total post-secondary institutions				519		1,482		2,001		1,498		-		-		503

20 | Second Quarterly Report 2023/24

Updated Financial Forecast

Table 1.12 Capital Expenditure Projects Greater Than $50 million ¹

Note: Information in bold type denotes changes from the 2023/24 First Quarterly Report released on September 27, 2023.

			Project		Estimated		Anticipated		Project Financing
($ millions)	Year of Completion		Cost to Sept. 30, 2023		Cost to Complete		Total Cost		Internal/ Borrowing		P3 Liability		Federal Gov't		Other Contrib'ns
Health facilities
Royal Columbian Hospital Redevelopment – Phase 1 2		2020		247		4		251		242		-		-		9
Red Fish Healing Centre for Mental Health and Addiction - θəqiʔ ɫəwʔənəq leləm 2		2021		129		2		131		131		-		-		-
Vancouver General Hospital – Operating Rooms Renewal – Phase 1 2		2021		101		-		101		34		-		-		67
Peace Arch Hospital Renewal 2		2022		86		1		87		8		-		-		79
Penticton Regional Hospital Patient Care Tower 2
– Direct procurement		2022		65		11		76		18		-		-		58
– P3 contract		2019		232		-		232		-		139		-		93
Dogwood Lodge Long-term Care Home Replacement		2023		61		4		65		-		-		-		65
Lions Gate Hospital – New Acute Care Facility		2024		167		143		310		144		-		-		166
Stuart Lake Hospital Replacement		2024		81		77		158		140		-		-		18
Clinical and Systems Transformation		2025		746		53		799		702		-		-		97
iHealth Project – Vancouver Island Health Authority		2025		136		19		155		55		-		-		100
Nanaimo Regional General Hospital – ICU/HAU Redevelopment		2025		33		27		60		22		-		-		38
University Hospital of Northern BC Redevelopment – Phase 1 (Site Preparation)		2025		-		103		103		62		-		-		41
Mills Memorial Hospital Replacement		2026		481		152		633		513		-		-		120
Royal Columbian Hospital Redevelopment Phases 2 & 3 5		2026		536		708		1,244		1,182		-		-		62
Abbotsford Long-Term Care		2027		-		211		211		157		-		-		54
Campbell River Long-Term Care		2027		-		134		134		80		-		-		54
Cowichan District Hospital Replacement		2027		138		1,308		1,446		1,148		-		-		298
Dawson Creek and District Hospital Replacement		2027		36		554		590		413		-		-		177
Delta Long-Term Care		2027		-		180		180		162		-		-		18
Nanaimo Long-Term Care		2027		-		286		286		172		-		-		114
New St. Paul's Hospital		2027		678		1,502		2,180		1,327		-		-		853
Richmond Long-Term Care		2027		-		178		178		178		-		-		-
Royal Inland Hospital Phil and Jennie Gaglardi Tower
– Direct procurement		2027		70		59		129		39		-		-		90
– P3 contract		2022		288		-		288		-		164		-		124
Western Communities Long-Term Care		2027		-		224		224		157		-		-		67
Burnaby Hospital Redevelopment – Phase 1 6		2028		100		583		683		633		-		-		50
Centre for Children and Youth Living with Health Complexity		2028		3		264		267		224		-		-		43
Dr. F.W. Green Memorial Home		2029		-		156		156		94		-		-		62
St. Vincent's Heather Long-Term Care		2028		2		205		207		207		-		-		-
Cariboo Memorial Hospital Redevelopment		2029		29		338		367		257		-		-		110
New Surrey Hospital and BC Cancer Centre		2029		10		2,871		2,881		2,816		-		-		65
St. Paul's Hospital Clinical Support and Research Centre		2029		-		638		638		332		-		-		306
Vancouver General Hospital – Operating Rooms Renewal – Phase 2		2029		15		317		332		312		-		-		20
Burnaby Hospital Redevelopment – Phase 2 and BC Cancer Centre		2030		-		1,731		1,731		1,703		-		-		28
Richmond Hospital Redevelopment 7		2031		8		853		861		791		-		-		70
Total health facilities				4,478		13,896		18,374		14,455		303		-		3,616

Second Quarterly Report 2023/24 | 21

Updated Financial Forecast

Table 1.12 Capital Expenditure Projects Greater Than $50 million ¹

Note: Information in bold type denotes changes from the 2023/24 First Quarterly Report released on September 27, 2023.

			Project		Estimated		Anticipated		Project Financing
	Year of		Cost to		Cost to		Total		Internal/		P3		Federal		Other
($ millions)	Completion		Sept. 30, 2023		Complete		Cost		Borrowing		Liability		Gov't		Contrib'ns
Transportation
Highway 91 Alex Fraser Bridge Capacity Improvements 2		2019		67		3		70		37		-		33		-
Highway 1 Illecillewaet Four-Laning and Brake Check improvements 2		2021		74		1		75		59		-		16		-
Highway 99 10-Mile Slide 2		2021		75		9		84		84		-		-		-
Highway 4 Kennedy Hill Safety Improvements 2		2022		54		-		54		40				14		-
Highway 14 Corridor improvements		2023		68		9		77		48		-		29		-
Highway 1 Chase Four-Laning		2023		109		87		196		184		-		12		-
Highway 1 Salmon Arm West		2023		90		50		140		109		-		31		-
Highway 91 to Highway 17 and Deltaport Way Corridor improvements		2023		243		17		260		87		-		82		91
Kootenay Lake ferry service upgrade		2023		54		31		85		68		-		17		-
West Fraser Road Realignment		2023		66		28		94		94		-		-		-
Highway 1 Quartz Creek Bridge Replacement		2024		73		46		119		69		-		50		-
Highway 1 Ford Road to Tappen Valley Road Four-Laning		2024		51		192		243		161		-		82		-
Highway 1 Kicking Horse Canyon Phase 4 8		2024		540		61		601		386		-		215		-
Pattullo Bridge Replacement 9		2024		772		605		1,377		1,076		301		-		-
Highway 5 Corridor		2024		173		177		350		350		-		-		-
Highway 1 Corridor – Falls Creek		2024		7		136		143		143		-		-		-
BC Transit Victoria HandyDART Facility		2025		32		52		84		41		-		21		22
Highway 1 Corridor – Nicomen Bridge		2025		10		134		144		144		-		-		-
Highway 7 Widening – 266th St. to 287th St.		2025		37		93		130		101		-		29		-
Highway 99 / Steveston Interchange, Transit & Cycling Improvements 10		2025		47		90		137		137		-		-		-
Highway 17 Keating Cross Overpass		2025		17		60		77		58		-		17		2
Broadway Subway 11		2026		1,263		1,564		2,827		1,380		450		897		100
Blackwater North Fraser Slide		2026		-		203		203		203		-		-		-
Cottonwood Hill at Highway 97 Slide		2026		-		335		335		335		-		-		-
Highway 1 216th St. to 264th St. widening		2026		68		277		345		226		-		96		23
Highway 1 Fraser Valley Corridor Improvements Mount Lehman Rd. to Highway 11 Site Preparation		2026		-		100		100		100		-		-		-
Highway 1 Selkirk		2026		5		124		129		97		-		32		-
Highway 95 Bridge Replacement		2026				90		90		61		-		29		-
Highway 1 Jumping Creek to MacDonald		2027		12		233		245		199		-		46		-
Highway 1 Goldstream Safety Improvements		2027		13		149		162		162		-				-
Belleville Terminal Replacement		2027		4		300		304		262		-		42		-
Highway 1 R.W. Bruhn Bridge		2027		40		215		255		164		-		91		-
Highway 1 Fraser Valley Corridor Improvements 264th St. to Mount Lehman Rd.		2028		37		2,303		2,340		2,340		-		-		-
Surrey Langley Skytrain Project 12		2028		116		3,894		4,010		2,476		-		1,306		228
Fraser River Tunnel Project 10,13		2030		69		4,079		4,148		4,148		-		-		-
Total transportation				4,286		15,747		20,033		15,629		751		3,187		466
Housing
Stanley New Fountain 2		2023		77		1		78		9		-		-		69
13583 81st Ave 2		2023		50		-		50		37		-		-		13
Crosstown		2024		48		24		72		61		-		-		11
58 W Hastings		2024		50		108		158		67		-		19		72
Clark & 1st Ave		2026		8		101		109		75		-		-		34
1015 Hastings St. Development		2025		16		135		151		110		-		22		19
128 to 134 East Cordova St.		2025		10		156		166		36		-		27		103
320 Hastings St. E. Redevelopment		2025		-		86		86		49		-		5		32
Total housing				259		611		870		444		-		73		353
Other taxpayer-supported
Nanaimo Correctional Centre Replacement		2024		142		39		181		181		-		-		-
Royal BC Museum – Collections and Research Building		2025		49		221		270		270		-		-		-
Total other taxpayer-supported				191		260		451		451		-		-		-
Total taxpayer-supported				11,981		33,614		45,595		36,246		1,054		3,260		5,035

22 | Second Quarterly Report 2023/24

Updated Financial Forecast

Table 1.12 Capital Expenditure Projects Greater Than $50 million ¹

Note: Information in bold type denotes changes from the 2023/24 First Quarterly Report released on September 27, 2023.

			Project		Estimated		Anticipated		Project Financing
	Year of		Cost to		Cost to		Total		Internal/		P3		Federal		Other
($ millions)	Completion		Sept. 30, 2023		Complete		Cost		Borrowing		Liability		Gov't		Contrib'ns
Power generation and transmission
BC Hydro
– Bridge River 2 upgrade units 7 and 8 project 2		2021		75		-		75		75		-		-		-
– LNG Canada load interconnection project 2		2021		81		1		82		58		-		-		24
– Peace Region Electricity Supply (PRES) project 2		2021		219		-		219		161		-		58		-
– Mica replace units 1 - 4 generator transformers project 2		2022		76		13		89		89		-		-		-
– 5L063 Telkwa relocation project 2		2023		50		3		53		53		-		-		-
– Various Sites - NERC Critical Infrastructure Protection implementation project for cyber assets 2		2023		48		8		56		56		-		-		-
– Street light replacement program 2		2023		57		18		75		75		-		-		-
– G.M. Shrum G1 to 10 control system upgrade		2023		69		6		75		75		-		-		-
– Lake Buntzen 1 Coquitlam Tunnel Gates Refurbishment project		2023		55		12		67		67		-		-		-
– Wahleach refurbish generator project		2023		54		10		64		64		-		-		-
– Capilano substation upgrade project		2024		64		23		87		87		-		-		-
– Mica modernize controls project		2024		50		6		56		56		-		-		-
– Vancouver Island radio system project		2024		45		8		53		53		-		-		-
– Natal - 60-138 kV switchyard upgrade project		2025		40		61		101		101		-		-		-
– Site C project 14		2025		12,386		3,614		16,000		16,000		-		-		-
– Burrard switchyard - control building upgrade project		2026		2		55		57		57		-		-		-
– Sperling substation metalclad switchgear replacement project		2026		40		36		76		76		-		-		-
– Mainwaring station upgrade project		2026		19		135		154		154		-		-		-
– Treaty Creek Terminal - Transmission Load Interconnection (KSM) project		2027		36		73		109		72		-		-		37
– Kootenay Canal modernize controls project		2028		5		56		61		61		-		-		-
– Peace to Kelly Lake stations sustainment project		2028		39		305		344		344		-		-		-
– John Hart dam seismic upgrade project		2029		129		784		913		913		-		-		-
– Bridge River 1 replace units 1-4 generators / governors project		2030		15		298		313		313		-		-		-
Total power generation and transmission				13,654		5,525		19,179		19,060		-		58		61
Total self-supported				13,654		5,525		19,179		19,060		-		58		61
Total $50 million projects				25,635		39,139		64,774		55,306		1,054		3,318		5,096

1	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.
2	Assets have been put into service and only trailing costs remain.
3	The anticipated total cost was previously reported as $52 million and has been reduced to $43 million to reflect current estimates.
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	The Royal Columbian Hospital new acute care tower is expected to be available to patients in 2025.
6	The Burnaby Hospital Hospital Phase 1 acute care tower is expected to be available to patients in 2025.
7	The Richmond Hospital new acute care tower is expected to be available to patients in 2028.
8	Kicking Horse Canyon Project costs exclude $11 million of past planning costs which are expensed.
9	Pattullo Bridge forecasted to open to the public in 2024 with old bridge decommissioning to follow. Forecasted amount reflects total expenditures including capitalized and expensed items.
10	Project is part of the Highway 99 Tunnel Program.
11	The Broadway Subway Project forecast and value of costs incurred to date include the City of Vancouver in-kind contribution of land rights, in keeping with the approved project budget. Under current government accounting, purchased intangible assets are given accounting recognition, and contributed intangible assets, such as land use rights or licenses are not.
12	Total project cost includes $3.939 billion capital costs and $0.071 billion operating costs.
13	The Fraser River Tunnel is forecasted to open to the public in 2030 with the removal of the existing tunnel to follow.
14	The approved project cost estimate is $16 billion, with a project in-service date of 2025 (first and last generating unit in-service in December 2024 and 2025, respectively). The anticipated project cost and cost to date include capital costs, charges subject to regulatory deferral and certain operating expenditures.

Second Quarterly Report 2023/24   | 23

Updated Financial Forecast

Table 1.13 2023/24 Provincial Debt ¹

	Year-to-Date to September 30									Full Year
	2023/24								Actual	2023/24							Actual
($ millions)		Budget	Actual		Variance			2022/23		Budget		Forecast		Variance			2022/23
Taxpayer-supported debt
Provincial government
Operating		1,000		-		(1,000	)		189		2,440		1,570		(870	)		-
Capital 2		38,550		37,965		(585	)		37,212		44,089		40,736		(3,353	)		36,538
Total provincial government		39,550		37,965		(1,585	)		37,401		46,529		42,306		(4,223	)		36,538
Taxpayer-supported entities
BC Transportation Financing Authority		20,672		20,106		(566	)		17,929		23,171		22,370		(801	)		18,992
Health authorities and hospital societies		2,347		2,144		(203	)		1,886		2,381		2,380		(1	)		1,983
Post-secondary institutions		929		909		(20	)		922		952		921		(31	)		910
Social housing 3		1,444		1,076		(368	)		1,051		2,227		980		(1,247	)		1,241
Other		306		273		(33	)		250		357		344		(13	)		270
Total taxpayer-supported entities		25,698		24,508		(1,190	)		22,038		29,088		26,995		(2,093	)		23,396
Total taxpayer-supported debt		65,248		62,473		(2,775	)		59,439		75,617		69,301		(6,316	)		59,934
Self-supported debt		30,496		31,194		698			28,778		31,607		31,603		(4	)		29,492
Total debt before forecast allowance		95,744		93,667		(2,077	)		88,217		107,224		100,904		(6,320	)		89,426
Forecast allowance		-		-		-			-		700		700		-			-
Total provincial debt		95,744		93,667		(2,077	)		88,217		107,924		101,604		(6,320	)		89,426

1	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.
2	Includes debt incurred by the government to fund the building of capital assets in the education, health, social housing and other sectors.
3	Includes debt incurred by BC Housing Management Commission and the Provincial Rental Housing Corporation to fund investments in affordable housing through HousingHub. The debt forecast reflects projects that have been approved as of September 2023.

 24 | Second Quarterly Report 2023/24  

Updated Financial Forecast

Table 1.14 2023/24 Statement of Financial Position

($ millions)	Actual March 31, 2023			Year-to-Date September 30, 2023			Forecast March 31, 2024
Financial assets:
Cash and temporary investments		8,247			5,816			1,950
Other financial assets		19,077			19,035			17,515
Sinking funds		521			511			522
Investments in commercial Crown corporations:
Retained earnings		12,634			13,074			13,410
Recoverable capital loans		28,145			29,767			30,145
Total investments in commercial Crown corporations		40,779			42,841			43,555
Total financial assets		68,624			68,203			63,542
Liabilities:
Accounts payable, accrued liabilities and others		25,402			20,776			21,804
Deferred revenue		15,005			16,377			15,727
Debt:
Taxpayer-supported debt		59,934			62,473			69,301
Self-supported debt		29,492			31,194			31,603
Forecast allowance		-			-			700
Total provincial debt		89,426			93,667			101,604
Add: debt offset by sinking funds		521			511			522
Add: foreign exchange adjustments		472			60			-
Less: guarantees and non-guaranteed debt		(1,523	)		(1,633	)		(1,458	)
Financial statement debt		88,896			92,605			100,668
Total liabilities		129,303			129,758			138,199
Net liabilities		(60,679	)		(61,555	)		(74,657	)
Capital and other non-financial assets:
Tangible capital assets		59,811			62,011			67,946
Other non-financial assets		3,571			3,760			3,857
Total capital and other non-financial assets		63,382			65,771			71,803
Accumulated surplus (deficit)		2,703			4,216			(2,854	)

Changes in Financial Position

	Year-to-Date September 30,			Forecast March 31,
($ millions)	2023			2024
Deficit (Surplus) for the period		(634	)		5,557
Changes in remeasurement (gains) losses and other adjustments		(879	)		-
Decrease (Increase) in accumulated surplus		(1,513	)		5,557
Capital and other non-financial asset changes:
Taxpayer-supported capital investments		3,533			11,171
Less: amortization and other accounting changes		(1,333	)		(3,036	)
Increase in net capital assets		2,200			8,135
Increase (decrease) in other non-financial assets		189			286
Increase in capital and other non-financial assets		2,389			8,421
Increase (decrease) in net liabilities		876			13,978
Investment and working capital changes:
Investment in commercial Crown corporations:
Increase in retained earnings		440			776
Self-supported capital investments		2,441			4,055
Less: loan repayments and other accounting changes		(819	)		(2,055	)
Increase in investment in commercial Crown corporations		2,062			2,776
Decrease in cash and temporary investments		(2,431	)		(6,297	)
Increase in other working capital		3,202			1,315
Increase (decrease) in investment and working capital		2,833			(2,206	)
Increase in financial statement debt		3,709			11,772
Changes in sinking fund debt and foreign exchange adjustments		422			471
Increase (decrease) in guarantees and non-guaranteed debt		110			(65	)
Increase in total provincial debt		4,241			12,178

Second Quarterly Report 2023/24   | 25

Updated Financial Forecast

Table 1.15 Material Assumptions – Revenue

Revenue Source and Assumptions ($ millions unless otherwise specified)		Budget Estimate 2023/24		First Quarter Forecast		Second Quarter Forecast		2023/24 Sensitivities
Personal income tax *		15,953		15,431		15,982
Current calendar year assumptions
Household income growth		6.1	%	6.3	%	6.7	%	+/- 1 percentage point change in 2023 B.C. household income growth equals +/- $140 to $160 million
Employee compensation growth		6.3	%	5.9	%	6.2	%
Tax base growth		6.0	%	6.2	%	5.7	%
Average tax yield		6.36	%	6.32	%	6.36	%
Current-year tax		15,528		14,924		15,094
Prior year's tax assessments		520		550		550
Unapplied taxes		100		150		150
B.C. Tax Reduction		(205	)	(205	)	(187	)
Non-refundable B.C. tax credits		(176	)	(176	)	(166	)
Policy neutral elasticity **		0.9		0.9		0.8		+/- 0.5 change in 2023 B.C. policy neutral elasticity equals +/- $440 to $460 million
Fiscal year assumptions
Prior-year adjustment		-		9		361
2022 Tax-year		2022 Assumptions
Household income growth		7.1	%	6.7	%	6.8	%	+/- 1 percentage point change in 2022 B.C. household or taxable income growth equals +/- $170 to $190 million one-time effect (prior-year adjustment) and could result in an additional +/- $140 to $160 million base change in 2023/24
Tax base growth		6.2	%	2.5	%	3.5	%
Average 2022 tax yield		6.38	%	6.34	%	6.40	%
2022 tax		14,713		14,113		14,363
2021 & prior year's tax assessments		510		700		710
Unapplied taxes		100		150		150
B.C. Tax Reduction		(197	)	(197	)	(180	)
Non-refundable B.C. tax credits		(176	)	(176	)	(151	)
Policy neutral elasticity **		0.8		0.2		0.5
* Reflects information as at October 31, 2023
** Per cent growth in current year tax revenue (excluding policy measures) relative to per cent growth in household income (calendar year).
Corporate income tax *		5,938		6,037		6,616
Components of revenue (fiscal year)
Instalments – subject to general rate		6,879		5,929		6,091
Instalments – subject to small business rate		350		295		281
Non-refundable B.C. tax credits		(187	)	(187	)	(170	)
Advance instalments		7,042		6,037		6,202
Prior-year settlement payment		(1,104	)	-		414
Current calendar year assumptions
National tax base ($ billions)		547.0		488.6		476.2		+/- 1% change in the 2023 national tax base equals +/- $70 to $80 million
B.C. instalment share of national tax base	��	13.6	%	13.4	%	13.7	%
Effective percentage tax rates (% general/small business)		12.0 / 2.0		12.0 / 2.0		12.0 / 2.0
Share of the B.C. tax base subject to the small business rate		23.8	%	23.4	%	22.4	%
B.C. tax base growth (post federal measures)		-7.1	%	-5.0	%	-7.1	%	+/- 1 percentage point change in the 2023 small business share equals -/+ $70 to $80 million
B.C. net operating surplus growth		-14.5	%	-11.8	%	-12.3	%
2022 Tax-year		2022 Assumptions
B.C. tax base growth (post federal measures)		7.5	%	1.9	%	5.7	%
Share of the B.C. tax base subject to small business rate		24.0	%	23.6	%	22.7	%	+/- 1% change in the 2022 B.C. tax base equals +/- $60 to $80 million one-time effect (prior-year adjustment) and could result in an additional instalments payments of +/- $80 to $100 million in 2023/24
B.C. net operating surplus growth		13.5	%	20.8	%	9.3	%
Gross 2022 tax		7,424		7,068		7,396
Prior-year settlement payment		(1,104	)	-		414
Prior years losses/gains (included in above)		(200	)	(100	)	(50	)
Non-refundable B.C. tax credits		(210	)	(210	)	(175	)
* Reflects information as at October 31, 2023

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 2023/24 instalments from the federal government reflects two-third of payments related to the 2023 tax year (paid during Apr-July 2023 and adjusted in Sept and Dec) and one-third of 2024 payments. Instalments for the 2023 (2024) tax year are based on B.C.'s share of the national tax base for the 2022 (2023) tax year and a forecast of the 2023 (2024) national tax base. B.C.'s share of the 2021 national tax base was 13.8%, based on tax assessments as of December 31, 2022. Cash adjustments for any under/over payments from the federal government in respect of 2022 will be received/paid on March 31, 2024.

ð

 26 | Second Quarterly Report 2023/24  

Updated Financial Forecast

Table 1.15 Material Assumptions – Revenue (continued)

Revenue Source and Assumptions ($ millions unless otherwise specified)	Budget Estimate 2023/24		First Quarter Forecast		Second Quarter Forecast		2023/24 Sensitivities
Employer health tax	2,731		2,750		2,750
Employee compensation growth	6.3	%	5.9	%	6.2	%	+/- 1 percentage point change in the 2023 employee compensation growth equals up to +/-$25 million
Provincial sales tax	10,187		10,362		10,362
Provincial sales tax base growth (fiscal year)	3.2	%	5.0	%	4.8	%	+/- 1 percentage point change in the 2023 consumer expenditure growth equals up to +/-$20 to $30 million
Calendar Year nominal expenditure
Consumer expenditures on durable goods	-3.6	%	2.0	%	2.1	%
Consumer expenditures on goods and services	6.9	%	6.4	%	5.2	%
Business investment	1.4	%	4.0	%	4.8	%	+/- 1 percentage point change in the 2023 business investment growth equals up to +/- $10 to $20 million
Other	3.4	%	2.6	%	1.6	%
Components of Provincial sales tax revenue
Consolidated Revenue Fund	10,178		10,353		10,353
BC Transportation Financing Authority	9		9		9
Fuel and carbon taxes	3,883		3,742		3,680
Calendar Year
Real GDP	0.4	%	1.2	%	1.0	%
Gasoline volumes	0.0	%	-1.0	%	-1.5	%
Diesel volumes	3.0	%	-2.0	%	-3.0	%
Natural gas volumes	1.0	%	-1.0	%	-2.0	%
Carbon tax rates (April 1)
Carbon dioxide equivalent emissions ($/tonne)	65		65		65
Natural gas (cents/gigajoule)	322.79	¢	322.79	¢	322.79	¢
Gasoline (cents/litre)	14.31	¢	14.31	¢	14.31	¢
Light fuel oil (cents/litre)	16.85	¢	16.85	¢	16.85	¢
Components of revenue *
Consolidated Revenue Fund	582		562		550
BC Transit	18		18		18
BC Transportation Financing Authority	472		462		462
Fuel tax revenue	1,072		1,042		1,030
Carbon tax revenue	2,811		2,700		2,650
Property taxes	3,488		3,591		3,591
Calendar Year
Consumer Price Index	3.9	%	3.9	%	4.0	%	+/-1 percentage point change in 2023 new construction & inflation growth equals up to +/- $30 million in residential property taxation revenue
Housing starts (units)	39,033		46,727		47,362
Home owner grants (fiscal year)	910		907		907
Components of revenue
Residential (net of home owner grants)	1,434		1,510		1,510
Speculation and vacancy	90		90		90
Non-residential	1,566		1,572		1,572		+/-1% change in 2023 total business property assessment value equals up to +/- $20 million in non-residential property taxation revenue
Rural area	147		149		149
Police	37		39		39
BC Assessment Authority	107		114		114
BC Transit	107		117		117
Other taxes	3,144		3,280		3,280
Calendar Year
Population	2.4	%	3.2	%	3.0	%
Residential sales value	-19.8	%	-11.6	%	-9.5	%
Real GDP	0.4	%	1.2	%	1.0	%
Nominal GDP	2.8	%	2.9	%	3.1	%
Components of revenue
Property transfer	1,799		1,950		1,950		+/- 1% change to 2023 residential sales value equals +/- $20 million in property transfer revenue, depending on property values
Additional Property Transfer Tax (included in above)	30		40		40
Tobacco	565		520		520
Insurance premium	780		810		810

ð

Second Quarterly Report 2023/24   | 27

Updated Financial Forecast

Table 1.15 Material Assumptions – Revenue (continued)

Revenue Source and Assumptions ($ millions unless otherwise specified)	Budget Estimate 2023/24		First Quarter Forecast		Second Quarter Forecast		2023/24 Sensitivities
Energy, sales of Crown land tenures, metals, minerals and other *	3,367		1,962		1,970
Natural gas price							+/- $0.25 change in the natural gas price equals +/- $130 to $150 million, including impacts on production volumes and royalty program credits, but excluding any changes from natural gas liquids revenue (e.g. butane, pentanes). Sensitivities can also vary significantly at different price levels.
Plant inlet, $C/gigajoule	3.04		1.29		1.40
Sumas, $US/MMBtu	3.99		2.42		2.58
Natural gas production volumes
Billions of cubic metres	72.2		70.2		73.9
Petajoules	2,995		2,927		3,076
Annual per cent change	8.9	%	7.2	%	12.7	%	+/- 1% change in natural gas volumes equals
							+/- $20 million in natural gas royalties.
Oil price ($US/bbl at Cushing, OK)	80.79		74.56		80.58		+/- 1 cent change in the exchange rate equals
							+/-$1 million in natural gas royalties.
Auctioned land base (000 hectares)	11		11		11
Average bid price/hectare ($)	275		200		200
Cash sales of Crown land tenures	3		2		2
Metallurgical coal price ($US/tonne, fob Australia)	252		248		249
Copper price ($US/lb)	3.56		3.82		3.80
Annual electricity volumes set by treaty (million mega-watt hours)	3.9		3.9		3.9		+/- $10/bbl change in petroleum price equals +/- $5 million in petroleum royalties
Mid-Columbia electricity price ($US/mega-watt hour)	107.84		92.90		89.30		+/- 12% change in natural gas liquids prices (equivalent to +/- $10/bbl oil price) equals
							+/- $80 to $100 million in natural gas liquids
Exchange rate (US¢/C$, calendar year)	74.7		74.7		74.2		royalties
Components of revenue
Bonus bid auctions:
Deferred revenue	61		60		60		+/- US$20 change in the average metallurgical coal price equals +/- $50 to $80 million +/- 10% change in the average Mid-Columbia electricity price equals +/- $50 million
Current-year cash (one-tenth)	-		1		1
Fees and rentals	50		38		38
Total bonus bids, fees and rentals	111		99		99
Natural gas royalties after deductions and allowances	2,016		837		898
Petroleum royalties	37		34		29
Columbia River Treaty electricity sales	522		478		466
BC Energy Regulator fees and levies	66		73		72		Based on a recommendation from the Auditor General to be consistent with generally accepted accounting principles, bonus bid revenue recognition reflects ten-year deferral of cash receipts from the sale of Crown land tenures
Coal, metals and other minerals revenue:
Coal tenures	8		8		8
Net coal mineral tax	372		194		161
Net metals and other minerals tax	47		51		48
Recoveries relating to revenue sharing payments to First Nations	170		170		170
Miscellaneous mining revenue	18		18		19
Total coal, metals and other minerals revenue	615		441		406
Gross royalties prior to deductions and allowances
Gross natural gas revenue	1,993		531		679
Gross natural gas liquids royalties revenue .	783		685		684
Royalty programs and infrastructure credits
Deep drilling	(400	)	(200	)	(228	)
Road, pipeline, Clean Growth Infrastructure Royalty and other infrastructure programs	(95	)	(65	)	(97	)
Total	(495	)	(265	)	(325	)
Implicit average natural gas royalty rate	22.2	%	22.5	%	19.8	%
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, 2023.

ð

28 | Second Quarterly Report 2023/24

Updated Financial Forecast

Table 1.15 Material Assumptions – Revenue (continued)

Revenue Source and Assumptions	Budget Estimate		First Quarter		Second Quarter
($ millions unless otherwise specified)	2023/24		Forecast		Forecast		2023/24 Sensitivities
Forests *	846		886		792
Prices (calendar year average)							+/- US$50 change in SPF price equals
SPF 2x4 ($US/thousand board feet)	400		400		400		+/- $100 to $150 million
Crown harvest volumes (million cubic metres)
Interior	30.0		30.0		26.0		+/- 10% change in Interior harvest volumes
Coast	8.0		8.0		8.0		equals +/- $50 to $60 million
Total	38.0		38.0		34.0		+/- 10% change in Coastal harvest volumes
B.C. Timber Sales (included in above)	6.3		6.3		4.0		equals +/- $15 to $25 million
Stumpage rates ($Cdn/cubic metre)
Total stumpage rates	18.07		19.04		18.45		+/- 1 cent change in exchange rate equals
							+/- $25 to $35 million in stumpage revenue
Components of revenue
Timber tenures (net of revenue sharing recoveries)	293		330		294
Recoveries relating to revenue sharing payments to First Nations	138		138		138
B.C. Timber Sales	274		274		214		The above sensitivities relate
Logging tax	100		100		100		to stumpage revenue only.
Other CRF revenue	30		33		35
Recoveries	11		11		11
* Reflects information as at October 25, 2023
Other natural resource	551		536		541
Components of revenue
Water rental and licences*	478		463		468		+/- 5% change in water power production
Recoveries	50		50		50		equals +/- $20 to $25 million
Angling and hunting permits and licences	10		10		10
Recoveries	13		13		13
* Water rentals for power purposes are indexed to Consumer Price Index.
Summary of natural resource revenue sharing with First Nations recoveries reflected within Table 1.15
Natural gas royalties	19		19		155
Columbia River Treaty electricity sales	-		-		70
Coal, metal and other minerals	170		170		170
Forests revenue	138		138		138
Total natural resource revenue sharing with First Nations	327		327		533
Other revenue	10,520		10,667		10,724
Components of revenue
Fees and licences
Motor vehicle licences and permits	618		614		621
International student health fees	70		90		90
Other Consolidated Revenue Fund	495		509		513
Summary consolidation eliminations	(14	)	(15	)	(15	)
Ministry vote recoveries	270		270		270
Taxpayer-supported Crown corporations	202		208		208
Post-secondary education fees	2,770		2,829		2,832
Other healthcare-related fees	496		510		540
School Districts	275		248		248
Investment earnings
Consolidated Revenue Fund	130		235		260
Fiscal agency loans & sinking funds earnings	1,088		1,014		939
Summary consolidation eliminations	(198	)	(204	)	(210	)
Taxpayer-supported Crown corporations	36		46		50
SUCH sector agencies	293		318		267
Sales of goods and services
SUCH sector agencies	986		988		1,032
BC Infrastructure Benefits Inc	246		279		218
Other taxpayer-supported Crown corporations	254		99		108
Miscellaneous	2,503		2,629		2,753

ð

Second Quarterly Report 2023/24 |   29

Updated Financial Forecast

Table 1.15 Material Assumptions – Revenue (continued)

Revenue Source and Assumptions	Budget Estimate		First Quarter		Second Quarter
($ millions unless otherwise specified)	2023/24		Forecast		Forecast		2023/24 Sensitivities
Health and social transfers	8,970		9,252		9,386
National Cash Transfers	49,421		49,421		49,421
Canada Health Transfer (CHT)
Annual growth	9.3	%	9.3	%	9.3	%
Canada Social Transfer (CST)	16,416		16,416		16,416
B.C.'s share of national population (June 1)	13.62	%	13.64	%	13.76	%	+/- 0.1 percentage point change in B.C.'s
							population share equals +/- $65 million
B.C. health and social transfers revenue
CHT	6,733		6,740		6,799
CST	2,237		2,239		2,259
Prior-year adjustments:
CHT	-		-		41
CST	-		-		14
CHT top up - strengthen public health care	-		273		273
Other federal contributions	4,623		4,240		4,500
Components of revenue
Disaster Financial Assistance Arrangements	1,268		848		1,085
B.C.'s share of the federal cannabis excise tax	70		85		95
Other Consolidated Revenue Fund	104		105		106
Vote Recoveries:
Labour Market Development Agreement	296		296		296
Labour Market and Skills Training Program	98		98		98
Home Care	82		82		82
Mental Health	82		82		82
Child Care	822		822		822
Child Safety, Family Support, Children in Care and with special needs	83		83		83
Public Transit	297		297		297
Local government services and transfers	188		188		188
Other recoveries	154		154		154
Taxpayer-supported Crown corporations	324		347		341
Post-secondary institutions	634		623		640
Other SUCH sector agencies	121		130		131
Service delivery agency direct revenue	8,981		9,118		9,216
School districts	681		661		673
Post-secondary institutions	4,962		4,992		5,063
Health authorities and hospital societies	1,165		1,216		1,306
BC Transportation Financing Authority	579		567		556
Other service delivery agencies	1,594		1,682		1,618
Commercial Crown corporation net income	3,489		3,492		3,489
BC Hydro	712		712		712		Sensitivities impacts shown below are before
							regulatory account transfers
Reservoir water inflows	100	%	85	%	85	%	+/-1% in hydro generation equals +/- $60 million
Mean gas price	5.08		4.46		4.46		+/-1% equals less than +/- $0.1 million
(Sumas, $US/MMbtu – BC Hydro forecast based on NYMEX forward selling prices)
Electricity prices (Mid-C, $US/MWh)	83.41		89.56		89.56		+/-1% change in electricity/gas trade income equals +/- $3.5 million
ICBC	-		-		-
Vehicle growth	1.9	%	1.9	%	1.7	%	+/-1% equals +/-$57 million
Current claims cost percentage change	11.8	%	11.8	%	14.9	%	+/-1% equals +/-$43 million
Unpaid claims balance ($ billions)	10.4		10.4		11.0		+/-1% equals +/-$110 to $130 million
Investment return	0.7	%	0.7	%	0.0	%	+/-1% return equals +/-$183 to $195 million
Loss ratio	84.3	%	84.3	%	82.0	%

30 | Second Quarterly Report 2023/24

Updated Financial Forecast

Table 1.16 Material Assumptions – Expense

Ministry Programs and Assumptions ($ millions unless otherwise specified)	Budget Estimate 2023/24	First Quarter Forecast		Second Quarter Forecast		2023/24 Sensitivities
Attorney General	773		776		777
New cases filed/processed (# for all courts)	242,000		235,000		242,000	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		28		29	Number of litigation cases resolved by court decisions or negotiated settlement.
Children and Family Development	1,912		1,912		1,912
Average children-in-care caseload (#)	4,852		4,822		4,860	The Q2 forecast reflects the latest data in the caseload trend. The average cost per child in care is
Average annual residential cost per child in care ($)	105,337		135,718		135,730	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 $3.3 million (excluding Indigenous CFS Agencies).
Education and Child Care	8,874		8,874		8,874
Public School Enrolment (# of FTEs)	591,272		591,272		591,272	Updated forecast enrolment figures are based on submissions from school districts of their actual enrolment as at September 30, 2022 for the 2022/23 school year, including February and May enrolment counts. Projections are based on the Ministry of Education and Child Care's enrolment forecasting model.
School age (K–12)	568,521		568,521		568,521
Continuing Education	905		905		905
Distributed Learning (online)	13,229		13,229		13,229
Summer	6,288		6,288		6,288
Adults	2,328		2,328		2,328
Emergency Management and Climate Readiness	101		101		101
Emergency Program Act (EPA)	36		36		36	Emergency disaster relief is unpredictable by nature. There are a number of factors that could impact the timing of delivering recovery projects resulting from the Major Events.
Forests	925		1,687		1,707
BC Timber Sales	237		237		237	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	204		966		986	Costs are driven by length of season and severity of weather conditions, severity of fires, proportion of interface fires, size of fires and damages caused. Costs have ranged from a low of $47 million in 2006 to a high of $809 million in 2021/22 (Fire season 2021).

ð

Second Quarterly Report 2023/24 |   31

Updated Financial Forecast

Table 1.16 Material Assumptions – Expense (continued)

Ministry Programs and Assumptions ($ millions unless otherwise specified)	Budget Estimate 2023/24	First Quarter Forecast	Second Quarter Forecast	2023/24 Sensitivities
Health	28,674	28,674	28,674
Pharmacare	1,578	1,578	1,578	A 1% change in PharmaCare utilization or prices affects costs by approximately $14 million.
Medical Services Plan (MSP)	7,039	7,039	7,039	A 1% increase in volume of services provided by fee-for-service physicians affects costs by approximately $40 million.
Regional Services	19,671	19,671	19,671	A 1% increase in volume of services provided by
				Health Authorities is estimated to be $182 million.
Post-Secondary Education and Future Skills	2,770	2,770	2,770
Student spaces in public institutions	206,085	206,085	206,086	Student enrolments may fluctuate due to a number of factors including economic changes and labour market needs. Current year forecast to be updated at Q3 to align with PSI reporting, consistent with past practice.
Public Safety and Solicitor General	1,028	1,028	1,028
Policing, Victim Services and Corrections	909	909	909	Policing, Victim Services and Corrections costs are sensitive to the volume and severity of criminal activity, the number of inmate beds occupied and the number of offenders under community supervision.
Social Development and Poverty Reduction	4,745	4,745	4,745
Temporary Assistance annual average caseload (#)	47,500	55,822	57,224	The expected to work caseload is sensitive to fluctuations in economic and employment trends. Costs are driven by changes to cost per case and caseload. Cost per case fluctuations result from changes in the needed supports required by clients, as well as caseload composition.
Disability Assistance annual average caseload (#)	121,600	122,359	122,551	The caseload for persons with disabilities is sensitive to the aging of the population and longer life expectancy for individuals with disabilities. Cost per case fluctuations are driven primarily by earnings exemptions which is dependent on the level of income earned by clients.
Adult Community Living:
Developmental Disabilities Programs Average caseload (#)	24,330	24,190	24,180	The adult community living caseload is sensitive to an aging population and to the level of service required. Cost per case fluctuations are driven by the proportion of clients receiving certain types of services at differing costs. For example, residential care services are significantly more costly than day programs.
Average cost per client ($)	53,600	58,700	58,700
Personal Supports Initiative (PSI)
Average caseload (#)	3,240	3,210	3,210
Average cost per client ($)	15,200	16,600	16,600

ð

32 | Second Quarterly Report 2023/24

Updated Financial Forecast

Table 1.16 Material Assumptions – Expense (continued)

Ministry Programs and Assumptions ($ millions unless otherwise specified)	Budget Estimate 2023/24		First Quarter Forecast		Second Quarter Forecast		2023/24 Sensitivities
Tax Transfers	3,159		3,078		3,034
Individuals	1,815.0		1,805.0		1,680.0
Climate Action Tax Credit	757.0		747.0		747.0		These tax transfers are now expensed as
BC Family Benefit	463.0		463.0		463.0		required under generally accepted accounting
Renter's Tax Credit	309.0		309.0		309.0		principles.
Sales Tax	50.0		50.0		40.0
Small Business Venture Capital	40.0		40.0		30.0
BC Senior's Home Renovation	3.0		3.0		3.0
Other tax transfers to individuals	193.0		193.0		88.0
							Changes in 2022 tax transfers will result in one-time effect (prior-year adjustment) and could result in an
Corporations	1,344.0		1,273.0		1,354.0		additional base change in 2023/24. Production
Film and Television	152.5		136.3		192.5		services tax credit is the most volatile of all tax
Production Services	890.3		835.5		793.0		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.
Scientific Research & Experimental Development	96.2		96.3		130.0
Interactive Digital Media	110.0		110.0		155.0
Mining Exploration	30.0		30.0		75.0
Other tax transfers to corporations	65.0		64.9		8.5
Prior-year adjustment (included above)*
Individuals			-		(95.5	)
Corporations			(8.3	)	54.8
2022 Tax-year	2022 Assumptions
Tax Transfers	2,206.0		2,196.0		2,164.0
Individuals	1,011.0		1,001.0		913.0
Corporations	1,195.0		1,195.0		1,251.0
Film and Television	140.0		140.0		170.0
Production Services	780.0		780.0		780.0
Scientific Research & Experimental Development	90.0		90.0		105.0
Interactive Digital Media	110.0		110.0		130.0
Other tax transfers to corporations	75.0		75.0		66.0
*2023/24 tax transfer forecast incorporates adjustments relating to prior years.
Management of Public Funds and Debt	1,309		1,400		1,500
Interest rates for new provincial borrowing:							Full year impact of MoPD on interest costs of a 1%
Short-term	4.04	%	4.97	%	4.98	%	change in interest rates equals $13 million;
Long-term	4.10	%	4.18	%	4.43	%	$100 million increase in debt level equals $4.6 million.
CDN/US exchange rate (cents)	132.6		133.4		135.0
Service delivery agency net spending	9,176		9,322		9,417
School districts	557		651		651
Post-secondary institutions	4,795		4,809		4,862
Health authorities and hospital societies	1,103		1,245		1,337		Agency expenses, net of Provincial funding. These
BC Transportation Financing Authority	1,887		1,894		1,923		are mainly funded through revenue from other
BC Infrastructure Benefits Inc	246		279		218		sources.
Other service delivery agencies	588		444		426

Second Quarterly Report 2023/24   |  33 

Updated Financial Forecast

Table 1.17 Full-Time Equivalents (FTEs) ¹

	Budget		Updated
	Estimate		Forecast				Actual
	2023/24		2023/24		Change		2022/23
Taxpayer-supported programs and agencies:
Ministries and special offices (CRF)		34,400		36,200		1,800		33,696
Service delivery agencies 2		8,693		8,747		54		7,746
Total FTEs		43,093		44,947		1,854		41,442

1

Full-time equivalents (FTEs) are a measure of staff employment. FTEs are calculated by dividing the total hours of employment paid for in a given period by the number of hours an individual, full-time person would normally work in that period. This does not equate to the physical number of employees. For example, two half-time employees would equal one FTE, or alternatively, three FTEs may represent two full-time employees who have worked sufficient overtime hours to equal an additional FTE.

2

Service delivery agency FTE amounts do not include SUCH sector staff employment.

34  | Second Quarterly Report 2023/24  

PART 2 | ECONOMIC REVIEW AND OUTLOOK ¹

Summary

B.C.'s economy is expected to post modest growth this year. However, some sectors have started showing signs of weakness, reflecting higher interest rates, affordability challenges and a slowdown of the global economy. Overall, economic activity in the province has broadly evolved in-line with expectations in the First Quarterly Report.

So far this year, the province's economic performance has been mixed, with moderate gains in employment and strong population growth while other areas have softened, including consumer spending, home sales and exports. In particular, consumer spending has been easing as higher interest rates and elevated inflation have slowed demand and reduced purchasing power. Meanwhile, housing markets continue to adjust to higher interest rates, with home sales activity slowing in recent months, although home construction has remained robust. Merchandise exports have been trending down, reflecting weaker demand from B.C.'s trading partners and lower prices for key commodities.

The Ministry of Finance (Ministry) forecasts economic growth of 1.0 per cent in 2023 and 0.7 per cent in 2024. As Chart 2.1 shows, the Ministry's outlook for B.C. real GDP is within the range of private sector forecasters in both years. The Ministry's analysis suggests that the province's economic growth will be stronger than the current average private sector outlook in both years. The Ministry will continue to monitor data to assess and update the economic outlook.

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

 

¹ Reflects data available as of November 9, 2023, unless otherwise indicated.

Second Quarterly Report 2023/24   |  35 

Economic Review and Outlook

The main downside risks to B.C.'s outlook include persistent inflationary pressures leading to higher than anticipated interest rates for longer, as well as weaker global demand. Other risks include climate change impacts, housing affordability, volatility in commodity and financial markets, and the evolution of international geopolitical conflicts.

In preparation for Budget 2024, the Minister of Finance will meet with members of the independent Economic Forecast Council on December 4, 2023 to obtain their views on the economic outlook. A revised economic forecast will be developed by the Ministry and published in Budget 2024.

British Columbia Economic Activity and Outlook

Since the First Quarterly Report, B.C.'s economy has experienced slowing momentum in some sectors; however, activity has remained resilient so far this year. Year-to-date data shows modest growth in employment. Meanwhile, retail sales were lower in the third quarter amid persistent inflation and export activity has been declining. In addition, home sales have declined following interest rate increases in the summer while the average home sale price has remained relatively flat in recent months. Housing starts have fallen but remain high by historical standards.

Table 2.1   British Columbia Economic Indicators

	Second Quarter	Third Quarter	Year-to-date
All data seasonally adjusted, per cent change	Apr. to Jun. 2023 change from Jan. to Mar. 2023	Jul. to Sep. 2023 change from Apr. to Jun. 2023	Jan. to Sep. 2023 change from Jan. to Sep. 2022
Employment	+0.2	+0.5	+1.4
Manufacturing shipments1	-0.6	-1.8	-7.6
Exports	-7.2	-4.8	-16.1
Retail sales1	+1.7	-1.0	+0.6
Consumer price index2,3	+3.7	+3.4	+4.2
Housing starts	+3.1	-9.1	+9.4
Residential sales units	+31.6	-6.0	-12.7
Residential average sale price	+9.3	+1.3	-3.5
Non-residential building permits	-12.3	+26.0	+2.1

1	Data to August	2	Non-seasonally adjusted data
3	Quarterly calculations for CPI are year-over-year, e.g. Second Quarter is Apr. to Jun. 2023 change from Apr. to Jun. 2022

Looking ahead, higher interest rates are expected to continue to weigh on the near-term outlook as they work to slow domestic and global demand. Economic activity in B.C. is on track to post modest growth this year, supported by moderate job gains and strong population growth. The Ministry's forecast for B.C. real GDP growth in 2023 has been revised down to 1.0 per cent from the First Quarterly Report forecast of 1.2 per cent. The forecast for 2024 has been lowered slightly to 0.7 per cent from 0.8 per cent. These revisions reflect the impact of higher interest rates resulting in slowing consumer spending, and lower investment and exports. Nominal GDP growth has been revised up to 3.1 per cent from 2.9 per cent for 2023, and to 3.5 per cent from 3.3 per cent for 2024. The upward revisions to the nominal GDP outlook partly reflect slightly higher expected inflation.

36  | Second Quarterly Report 2023/24  

Economic Review and Outlook

Labour Market

B.C.'s labour market has picked up in the third quarter (July to September) of this year. Overall, employment grew by 1.4 per cent year-to-date to October 2023 compared to the same period last year. Full-time employment increased by about 46,170 jobs on a year-to-date basis, offsetting a decline of about 6,890 part-time jobs. Job creation was recorded in both the public sector (+23,850 jobs) and self-employment (+22,890 jobs), while private sector jobs declined (-7,460 jobs).

On an industry basis, year-to-date employment gains were concentrated in the services sector (+47,350 jobs), led by educational services (+17,350 jobs), accommodation and food services (+12,130 jobs), and finance, insurance, real estate, and leasing (+11,780 jobs). Meanwhile, employment in the goods sector was lower (-8,070 jobs) compared to the first ten months of last year, with a decline in manufacturing (-14,670 jobs) offsetting growth in other industries.

Employment among women accounted for most of the gains in the labour market so far this year. Women represented 48.3 per cent of B.C.'s labour force and filled 69.7 per cent of the new full-time jobs created in the first ten months of this year. Over the same period, employment among women grew by 1.8 per cent, surpassing employment growth among men at 1.1 per cent.

Chart 2.2 B.C. Employment

B.C.'s unemployment rate has risen from the historical lows observed in 2022 as labour force expansion has outpaced job gains. B.C.'s unemployment rate was 5.4 per cent in October 2023 and averaged 5.1 per cent year-to-date, 0.2 percentage points below the national average. Meanwhile, job vacancies in the province have been easing, with the job vacancy rate reaching 4.2 per cent in August, down from its peak of 7.1 per cent in December 2021.

Second Quarterly Report 2023/24   |  37 

Economic Review and Outlook

B.C.'s labour force has expanded by 1.9 per cent year-to-date to October 2023, supported by strong population growth. The province's labour force participation rate averaged 65.1 per cent, unchanged from the first ten months of 2022. While the labour force participation rate for the prime-age group (25-54 years) has surpassed its pre-pandemic five-year average, there has been a decline in the participation rate among the 55+ years age group. An aging population poses a challenge for labour markets in B.C. and across the country.

Employee compensation (i.e., aggregate wages, salaries, and employers' social contributions) in B.C. increased by 6.0 per cent year-to-date to June 2023 compared to the same period of 2022. So far this year, the average hourly wage rate in B.C. rose by 6.4 per cent compared to the first ten months of 2022, the fastest growth rate in the country. On average, wages grew faster than the consumer price index for B.C., which increased by 4.2 per cent over the first nine months of this year.

Outlook

The outlook for B.C.'s labour market remains stable, supported by strong population growth. However, the labour market is expected to face headwinds next year due to weaker domestic and global economic activity. The Ministry forecasts employment in B.C. to increase by 1.4 per cent in 2023 (approximately +38,500 jobs), followed by annual growth of 0.6 per cent in 2024 (approximately +18,000 jobs).

The province's unemployment rate is expected to average 5.2 per cent in 2023 and 5.9 per cent in 2024, reflecting solid labour force growth alongside a broader slowdown in economic activity.

Consumer Spending and Inflation

Consumer spending has been easing as higher interest rates and elevated inflation soften consumer demand and reduce purchasing power. Further, Statistics Canada reported that the port strike in B.C. impacted about 17 per cent of Canadian retailers in July and about 12 per cent in August. Year-to-date to August, B.C. nominal retail sales rose by 0.6 per cent. Meanwhile, consumer prices rose by 4.4 per cent over the same period, indicating a lower volume of sales. Year-to-date sales gains were led by increased spending at food and beverage stores (+4.3 per cent); clothing, accessories and related retailers (+15.0 per cent); and general merchandise stores (+6.3 per cent). Declines in spending were led by lower sales at building material and garden equipment and supplies dealers (-16.2 per cent) and gasoline stations (-8.3 per cent).

Sales at food services and drinking places in B.C., a component of the service sector, rose by 13.0 per cent year-to-date to August 2023 compared to the same period last year, partly due to higher prices.

 38 | Second Quarterly Report 2023/24  

Economic Review and Outlook

Chart 2.3     B.C. Retail Sales

 

Consumer sentiment continued to weaken amid higher interest rates and persistent inflation. The Conference Board of Canada's consumer confidence index for B.C. reached a record low in September, even below the levels seen in the early months of the COVID-19 pandemic. While sentiment improved in October, consumer confidence this year remained much weaker compared to last year. Furthermore, the Bank of Canada's latest Canadian Survey of Consumer Expectations (conducted in August 2023 after the Bank resumed hiking interest rates in June and July) noted that high interest rates and increased living expenses remained key concerns for Canadian consumers.

Inflationary pressures have moderated among a broad number of goods and services but remain elevated. B.C.'s consumer price inflation reached 3.3 per cent in September 2023 after peaking at 8.1 per cent in May 2022. Overall, inflation in B.C. averaged 4.2 per cent in the first nine months of 2023. During this period, price growth was led by shelter (+5.5 per cent) and food (+7.7 per cent). This reflects higher mortgage costs and rent, as well as higher prices for food purchased at both stores and restaurants. Shelter inflation had been trending lower until August 2023 when it started to accelerate again, following the Bank of Canada's resumption of interest rate increases in June and July. Meanwhile, food inflation has been decelerating since its high of 10.2 per cent in January. However, the food inflation reading of 5.9 per cent in September was still well above headline inflation. On the other hand, lower gasoline prices have been driving headline inflation down during the first nine months of this year. On average, gasoline prices were 4.7 per cent lower year-to-date compared to the same period last year.

Second Quarterly Report 2023/24   | 39

Economic Review and Outlook

Chart 2.4    B.C. Inflation

 

Outlook

Household consumption is expected to ease in the near-term as the cumulative effects of interest rate increases and elevated prices reduce consumer demand and purchasing power. The Ministry forecasts real household consumption of goods and services to increase by 1.2 per cent in 2023, followed by 2.1 per cent growth in 2024.

The Ministry expects nominal retail sales to grow by 0.7 per cent in 2023 and by 2.2 per cent in 2024, as support from strong population growth is somewhat offset by weaker consumer demand due to high interest rates.

Consumer price pressures, particularly for shelter, are anticipated to persist in the near-term. Overall, consumer price inflation in B.C. is forecast to be 4.0 per cent in 2023 and 2.7 per cent in 2024.

Housing

Housing markets continue to adjust to the lagged impact of past interest rate increases, as well as more recent rate hikes in June and July of 2023. Housing market activity in B.C. has slowed in recent months as a result. Year-to-date to September, MLS home sales fell by 12.7 per cent compared to the first nine months of 2022. Sales decreased in every region in B.C., including key markets such as Greater Vancouver (-13.9 per cent), Okanagan-Mainline (-19.3 per cent), Fraser Valley (-8.1 per cent), and Victoria (-10.6 per cent).

Home price pressures have been softening as the sales-to-new-listings ratio improved. However, affordability challenges remain with higher mortgage rates and elevated price levels. Following consecutive monthly increases earlier in the year, the MLS average home sale price has stayed relatively flat in recent months. Year-to-date to September, the MLS average home sale price was 3.5 per cent lower than the same period of 2022.

 40 | Second Quarterly Report 2023/24  

Economic Review and Outlook

Chart 2.5     B.C. Home Sales and Price

 

Meanwhile, MLS composite benchmark house prices (which incorporates benchmark attributes by dwelling type in each region) decreased across all major markets in B.C. on a year-to-date basis. Declines were observed in the Fraser Valley (-10.5 per cent), Vancouver Island (-7.7 per cent), Victoria (-7.1 per cent), the Okanagan Valley (-5.2 per cent) and Greater Vancouver (-3.6 per cent).

Chart 2.6     Greater Vancouver HPI Benchmark Price

Second Quarterly Report 2023/24   | 41

Economic Review and Outlook

Home construction in B.C. has been resilient to interest rate increases but has moderated in the third quarter (July to September). So far this year, all major Census Metropolitan Areas (CMA) in B.C. recorded double-digit growth for homes under construction, reflecting the strength observed in B.C. housing starts in previous quarters. However, home completion was mixed during the same period, with a decline in the Vancouver CMA while the Victoria CMA experienced an increase. Recent weaknesses in home sales have added headwinds to homebuilders who have already been facing reduced profitability due to tighter financing conditions, skilled-labour shortages and rising construction costs. Despite the recent moderation, homebuilding activity in B.C. has remained robust so far this year, supported by multi-family development projects in the Vancouver CMA. Overall, B.C. housing starts were up by 9.4 per cent year-to-date to September and averaged 49,652 units, well above the ten-year historical average of 39,073 units.

Chart 2.7     B.C. Housing Starts

Residential building permits (a leading indicator of home construction) have slowed in the third quarter, signaling potential moderation in homebuilding activity going forward. Year-to-date to September, the value of single-dwelling and multiple-dwelling permits fell by 19.7 per cent and 12.9 per cent, respectively, while the total number of residential building permits was down by 12.1 per cent. Furthermore, the unsold inventory of newly completed homes in the first nine months of this year has been increasing in the CMAs of Vancouver, Victoria and Abbotsford compared to the same period of 2022.

 42 | Second Quarterly Report 2023/24  

Economic Review and Outlook

Outlook

The Ministry expects the impact of high interest rates to continue to weigh on housing market activity this year. The Ministry forecasts unit home sales to decrease by 7.0 per cent in 2023 and then increase by 9.3 per cent in 2024. Average home sale prices are expected to decrease by 2.7 per cent in 2023 and then grow by 2.4 per cent in 2024. Putting unit sales and prices together, the total value of home sales is forecast to decrease by 9.5 per cent in 2023 and then increase by 11.8 per cent in 2024.

The Ministry prudently expects B.C. housing starts to total approximately 47,400 units in 2023 and 42,900 units in 2024, supported by population growth and public sector investment amid higher interest rates and construction costs, skilled-labour shortages, as well as a broader economic slowdown.

Business and Government

Non-residential construction permitting has remained strong this year, partly due to a recent spike in August. The total value of non-residential building permits rose by 2.1 per cent year-to-date to September compared to the same period last year. This increase was driven by higher permit issuance for commercial buildings (+7.5 per cent) and industrial structures (+0.9 per cent), which offset a decline in permit issuance for institutional and governmental buildings (-4.5 per cent).

Businesses in B.C. and at the national level are facing slowing demand and tighter financing conditions while concerns about labour shortages and cost pressures are easing. The Canadian Federation of Independent Business reported that in October 2023, more small business owners expect stronger performance over the next year than those expecting weaker performance. However, so far this year, small business confidence has been slightly lower than the same period of last year and has remained largely unchanged since June 2023.

After three and a half years, B.C.’s tourism activity is approaching pre-pandemic levels. International travelers entering B.C. rose by 81.8 per cent year-to-date to August 2023 compared to the same period of last year. While the number of U.S. visitors has surpassed pre-pandemic levels and reached a new record in August, the number of non-U.S. visitors has levelled off and remained well below pre-pandemic levels. Overall, the 681,195 international travelers entering B.C. in August 2023 were slightly below the roughly 700,000 visitors seen in an average month prior to the pandemic.

Outlook

The Ministry forecasts total real investment in B.C. to rise by 3.8 per cent in 2023, supported by increases in government capital investment. Then total real investment is projected to grow by 2.2 per cent in 2024.

In the near-term, real business investment is projected to decrease by 1.6 per cent in 2023 and then increase by 0.6 per cent in 2024, reflecting the dampening effects of higher interest rates.

Real expenditure on goods and services by all levels of government is forecast to increase by 1.9 per cent in 2023 and then decline by 3.0 per cent in 2024 due to the timing and one-time nature of some government expenditures, such as the 2022/23 Supplementary Estimates.

Second Quarterly Report 2023/24   | 43

Economic Review and Outlook

The Ministry expects nominal net operating surplus of corporations (an approximation of corporate profits) to decrease by 12.3 per cent in 2023 and by 6.6 per cent in 2024 amid slower global economic activity.

External Trade and Commodity Markets

Weaker global demand and lower prices for key commodities continued to weigh on B.C. merchandise exports. Furthermore, exports leaving B.C.’s ports were disrupted in July due to the port strike, with the value of monthly exports falling by 9.3 per cent, but have since bounced back as port activities resumed. During the first nine months of 2023, the value of B.C. goods exports decreased by 16.1 per cent compared to the same period of last year. Year-to-date declines were broad-based, led by lower exports of energy products (-22.1 per cent) and forestry products and building and packaging materials (-30.0 per cent). Meanwhile, exports of electronic and electrical equipment and parts (+13.5 per cent) and industrial machinery, equipment and parts (+14.0 per cent) partially offset these declines.

Merchandise exports to the U.S. accounted for 55.0 per cent of B.C.’s total goods exports in the first nine months of 2023. During this period, goods exports to the U.S. decreased by 18.6 per cent, largely due to a decline in exports of energy products (-28.5 per cent) and forestry products and building and packaging materials (-32.0 per cent). Meanwhile, total goods exports to non-U.S. destinations fell by 12.9 per cent, led by lower coal exports to China (-28.9 per cent) and South Korea (-33.7 per cent).

Chart 2.8     B.C. Exports

Similar to merchandise exports, B.C.’s manufacturing sector was affected by the port strike due to disruptions to the supply of raw materials as well as transportation. B.C.’s manufacturing shipments fell by 3.3 per cent in July when the strike happened, and rebounded by 2.1 per cent in the following month. Year-to-date to August, B.C.’s manufacturing shipments decreased by 7.6 per cent compared to the same period of 2022, mainly due to reduced shipments of wood products (-34.4 per cent).

 44 | Second Quarterly Report 2023/24  

Economic Review and Outlook

So far this year, prices for B.C.’s key export commodities have declined, reflecting lower demand from manufacturers amid high interest rates and slower global economic activity. The price of Western spruce-pine-fir (SPF) 2x4 lumber averaged $396 US/000 board feet during the January to October period of 2023, down 54.6 per cent compared to the same period of 2022.

Despite a recent rebound due to voluntary production cuts by major oil producing countries, oil and gas prices have been lower this year amid concerns over a broader global economic slowdown. In the first ten months of 2023, the West Texas Intermediate (WTI) price averaged $78.22 per barrel, down 19.9 per cent from the same period of 2022. The plant inlet price of natural gas fell 55.5 per cent year-to-date, averaging $1.71 C/GJ in the first ten months of 2023.

Meanwhile, the average metallurgical coal price fell by 25.3 per cent year-to-date to October 2023 compared to the same period of 2022. Zinc and copper declined by 25.1 per cent and 4.7 per cent, respectively. The price for molybdenum rose 42.2 per cent, while price gains for gold and silver were modest.

Outlook

Real exports of goods and services are forecast to fall by 1.6 per cent in 2023 and then grow by 0.1 per cent in 2024, reflecting lower commodity prices and weaker global demand.

The price of lumber is forecast to average $400 US/000 board feet in 2023 and $450 US/000 board feet in 2024. The plant inlet price for natural gas is expected to average $1.40 C/GJ in 2023/24.

Demographics

B.C.’s population continued to experience strong growth in recent quarters. On July 1, 2023, B.C.’s population was 5.52 million people, up by 3.0 per cent from the same date in 2022. During the January to June period of 2023, the province welcomed 89,881 net migrants, up 25.1 per cent compared to the same period of 2022. Underlying this increase in migration was higher net international migration (from +58,350 persons to +91,143 persons), with more than double the number of net non-permanent residents (from +25,567 to +53,327). This increase in net international migration offset a decline in net interprovincial migration (from +13,481 persons to -1,262 persons).

Outlook

B.C.’s July 1 population is projected to increase by 2.5 per cent in 2024.

Total net migration is expected to be about 169,300 persons in 2023 and 122,100 persons in 2024. During this period, B.C. is expected to experience a net loss of interprovincial migrants while international migrants become the sole driver of growth in total net migration.

Second Quarterly Report 2023/24   | 45

Economic Review and Outlook

Risks to the Economic Outlook

While the province’s economy has been resilient, B.C.’s economic outlook is subject to both upside and downside risks. Some of the upside risks include inflationary pressures easing sooner than expected, economic activity from a growing population and a less pronounced slowing of the global economy. However, the overall risks are weighted to the downside. Downside risks to B.C.’s economic outlook include the following:

· persistent high inflation leading to higher interest rates over a longer period, weighing on consumer spending and business investment;

· higher mortgage costs and rent reducing affordability and disposable income;

· aging demographics and housing affordability weighing on the supply of labour;

· severe climate-related events disrupting the lives and livelihoods of British Columbians, destroying productive capital, and impacting economic activity;

· weaker than expected global economic activity and broader economic challenges in Europe and Asia;

· lower prices for B.C.’s major commodity exports, such as lumber, pulp, natural gas, and coal;

· geopolitical conflicts weighing on trade and commodity markets;

· higher volatility in international foreign exchange, stock, and bond markets; 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 updated near-term economic outlook for B.C.’s major trading partners has largely moderated since the First Quarterly Report, primarily due to monetary policy. Meanwhile, the U.S. economy has shown resiliency, in part due to its stronger-than-anticipated labour market. Most of B.C.’s trading partners are expected to experience prolonged higher interest rates, reflecting persistent inflation, which is expected to lead to a slowdown in consumption, investment, and exports. Furthermore, geopolitical uncertainties add risk to the global economic outlook.

United States

The U.S. economy accelerated in the third quarter (July to September) of 2023 despite a restrictive monetary policy environment. U.S. real GDP rose by an annualized rate of 4.9 per cent in the third quarter, following annualized growth of 2.1 per cent in the second quarter (April to June). Third quarter growth was led by consumer spending and inventory accumulation. The increases were partially offset by decreased net exports.

As of October 2023, the U.S. labour market had recorded net payroll job gains for 34 consecutive months. On a year-to-date basis, employment was 3.7 million jobs (+2.4 per cent) higher than the same period of the previous year. The unemployment rate stood at 3.9 per cent in October 2023. Year-to-date to October, the unemployment rate averaged 3.6 per cent, unchanged from the same period in 2022.

 46 | Second Quarterly Report 2023/24  

Economic Review and Outlook

Chart 2.9     U.S. Real GDP

As interest rates increased, U.S. home sales activity has generally slowed so far in 2023. Year-to-date to September 2023, existing home sales were 21.9 per cent lower, while new single-family home sales were 5.3 per cent higher compared to the same period last year. Over the same time period, the median sales price for existing homes was flat (+0.2 per cent) and the median sales price for new single-family homes was down (-4.6 per cent). U.S. housing starts declined by 12.6 per cent in the first nine months of 2023 compared to the same period of 2022, reflecting fewer single-family and multi-family starts. Furthermore, U.S. residential building permits, an indicator of future building activity, declined by 16.3 per cent in the first nine months of 2023 compared to the same period last year.

Chart 2.10     U.S. Housing Starts

Second Quarterly Report 2023/24   | 47

Economic Review and Outlook

Consumer price inflation in the U.S. increased from 3.0 per cent (year-over-year) in June to 3.7 per cent (year-over-year) in September, with shelter costs continuing to be the main driver of recent increases. Despite the recent increase, U.S. inflation has come down from its peak of 9.1 per cent (year-over-year) in June 2022. The general downward trend in consumer price inflation in 2023 partly reflected easing demand due to the tightening of U.S. monetary policy. Year-to-date to September 2023, U.S. nominal retail sales grew 3.2 per cent compared to the same period in 2022.

Outlook

In October 2023, Consensus Economics (Consensus) projected that U.S. real GDP will grow 2.2 per cent in 2023 (0.6 percentage points higher than its July 2023 projections) and 0.9 per cent in 2024 (0.4 percentage points higher than its July 2023 projections).

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

	2023		2024
		Per cent change in real GDP
B.C. Ministry of Finance		2.1		0.8
Consensus Economics (October 2023*)		2.2		0.9

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

The prospect of higher interest rates being maintained for longer than previously anticipated is expected to exert pressure on the U.S. economy in the near-term. Furthermore, geopolitical tensions worldwide and the slowdown of the global economy continue to pose risks for trade and economic growth. Given these uncertainties, the Ministry projects that U.S. real GDP will grow by 2.1 per cent in 2023 and by 0.8 per cent in 2024.

Chart 2.11Consensus Outlook for the U.S. in 2023

The chart above represents forecasts for U.S. real GDP growth in 2023 as polled on specific dates. For example, forecasters surveyed on January 10, 2022 had an average 2023 U.S. real GDP growth forecast of 2.6 per cent, while on November 6, 2023 they forecast 2023 U.S. real GDP to grow by 2.4 per cent.

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Economic Review and Outlook

Canada

The Canadian economy declined slightly (-0.2 per cent, annualized) in the second quarter of 2023 compared to the first quarter (January to March). The quarterly fall in real GDP was led by continued declines in housing investment, smaller inventory accumulation, as well as slower international exports and household spending. Increased business investment and higher government spending provided some offset.

Chart 2.12     Canadian Real GDP

Canadian employment growth slowed in the second and third quarters of 2023 following faster expansion in the first quarter. Year-to-date to October, employment was up by 2.5 per cent compared to the same period last year. Meanwhile, the unemployment rate was 5.7 per cent in October, up from 5.5 per cent in September. Year-to-date to October, the unemployment rate averaged 5.3 per cent, unchanged from the same period in 2022.

Job vacancies continued to decrease in the second quarter but remained above pre-pandemic levels. The declines in job vacancies has been concentrated in full-time and permanent positions.

Canadian housing market activity continued to be affected by higher interest rates. Housing starts were down by 8.0 per cent year-to-date to September compared to the same period in 2022. The decline so far in 2023 was primarily driven by slower construction in the urban centers of Montreal (-44.8 per cent) and Edmonton (-18.4 per cent), but was partially offset by growth in Toronto (+21.4 per cent) and Vancouver (+37.6 per cent). Canadian MLS home sales decreased by 1.6 per cent in the third quarter of 2023 and were down by 14.9 per cent year-to-date to September compared to the same period last year. The national average home sale price decreased by 4.6 per cent year-to-date to September.

Consumer price inflation in Canada has come down from its peak of 8.1 per cent in June 2022. However, progress toward the Bank of Canada’s 2 per cent target has been slow, with inflation averaging 3.7 per cent in the third quarter, up from 3.5 per cent in

the second quarter. Year-over-year, national inflation was 3.8 per cent in September 2023, with shelter (+6.0 per cent) and food (+5.9 per cent) adding the most upward pressure on inflation. Canadian nominal retail sales were up 2.1 per cent year-to-date to August compared to the same period last year. On a volume basis, Canadian retail sales were also up 2.1 per cent year-to-date to August.

Second Quarterly Report 2023/24   | 49

Economic Review and Outlook

Year-to-date to September, the value of Canadian merchandise exports declined by 3.2 per cent compared to the same period in 2022, led by lower exports of energy products (-21.8 per cent) and forestry products and building and packaging materials (-19.4 per cent). These declines mainly reflected lower prices for oil, natural gas, and lumber.

Outlook

The October 2023 Consensus forecasted Canadian real GDP to rise by 1.1 per cent in 2023 and by 0.6 per cent in 2024, both 0.3 percentage points below the July 2023 survey. The revisions follow the minor GDP contraction in the second quarter of 2023, as well as the anticipation of prolonged higher interest rates in 2024.

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

	2023		2024
		Per cent change in real GDP
B.C. Ministry of Finance		1.1		0.5
Consensus Economics (October 2023*)		1.1		0.6

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

The effects of elevated interest rates on household spending and business investment, coupled with geopolitical risks worldwide, continue to pose challenges for the Canadian economy. The Ministry assumes that the Canadian economy will grow by 1.1 per cent in 2023 and 0.5 per cent in 2024.

Chart 2.13     Consensus Outlook for Canada in 2023

The chart above represents forecasts for Canadian real GDP growth in 2023 as polled on specific dates. For example, forecasters surveyed on January 10, 2022 had an average 2023 Canadian real GDP growth forecast of 3.0 per cent, while on November 6, 2023 they forecast 2023 Canadian real GDP to grow by 1.1 per cent.

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Economic Review and Outlook

Asia

China's real GDP growth accelerated to 5.5 per cent (annualized) in the third quarter of 2023, following slow growth in the second quarter. The improvement in China's economy partly reflected the government's stimulus measures such as interest rate cuts and property market support measures, which were implemented in response to the underperformance witnessed in the second quarter. Other contributing factors included an upturn in retail sales and industrial production, easing deflationary pressures, and improved net trade. However, potential headwinds that could weigh on future economic growth remain, including high youth unemployment, a sluggish real estate market, low consumer and business confidence, and rising geopolitical tensions.

Japan's real GDP grew by 1.8 per cent year-to-date to the second quarter of 2023. Growth was broad-based, led by an increase in private consumption. Residential investment also contributed to the growth, with the sector experiencing its strongest quarter since the first quarter of 2019. Meanwhile, Japan has generally faced less inflationary pressure than other countries. Correspondingly, the Bank of Japan has not raised interest rates as much as other central banks. This has led to the depreciation of the Japanese Yen, presenting challenges to the Bank of Japan's accommodative monetary policy.

Outlook

In October 2023, Consensus projected that China's real GDP will grow by 5.0 per cent in 2023 (0.5 percentage points lower than its July 2023 projections) and 4.4 per cent in 2024 (0.4 percentage points lower than its July 2023 projections). The Ministry also projects that China's economy will grow by 5.0 per cent in 2023, but forecasts 4.2 per cent growth in 2024, reflecting risks in China's real estate and labour markets.

In October 2023, Consensus projected that Japan's real GDP will grow by 1.9 per cent in 2023 (0.7 percentage points higher than its July 2023 projections) and 0.9 per cent in 2024 (0.1 percentage points lower than its July 2023 projections). In recognition of slower global economic growth, the Ministry projects that Japan's economy will grow by 1.8 per cent in 2023, and 0.7 per cent in 2024.

Europe

Economic activity in the euro zone slowed in the third quarter of 2023 compared to the previous quarter, largely due to monetary policy tightening. Annualized real GDP in the euro zone decreased by 0.4 per cent in the third quarter, following a 0.6 per cent increase in the second quarter. Compared to the previous quarter, the third quarter economic decline was led by a real GDP contraction in Germany, partially offset by increases in Spain and Belgium.

In September 2023, headline inflation eased to 4.3 per cent year-over-year, but was well above the European Central Bank's (ECB) 2 per cent target, with food prices continuing to be the main driver of euro area inflation. On October 26, 2023, the ECB maintained their policy interest rate at 4.0 per cent after nine straight interest rate increases that brought the rate to its highest level since 2000. Meanwhile, the ECB continues to keep options open for further rate increases in the future if appropriate.

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Economic Review and Outlook

Outlook

The October 2023 Consensus forecasted that euro zone real GDP will grow by 0.5 per cent in 2023 and 0.6 per cent in 2024. Consensus projections were unchanged for 2023 and 0.3 percentage points lower for 2024, compared to its July forecast. In recognition of the euro zone's restrictive monetary policy, the Ministry projects that the euro zone's economy will grow by 0.4 per cent in 2023, and 0.5 per cent in 2024.

Financial Markets

Interest Rates

Both the U.S. Federal Reserve (Fed) and the Bank of Canada (BoC) paused interest rate hikes in recent months after raising interest rates earlier in the year.

On November 1, 2023, the Fed held the target range for the federal funds rate steady at 5.25 to 5.50 per cent, following a similar pause in rate hikes in its previous policy meeting in September. The November pause partly reflected its view that U.S. economic activity had been expanding at a strong pace with job gains starting to moderate but remaining strong. However, with inflation staying elevated, the Fed stated that it would adjust its monetary policy stance if risks emerge and would continue to reduce its holdings of Treasury securities and agency debt and agency mortgage-backed securities.

The BoC maintained its overnight rate at 5.00 per cent at both its September and October interest rate policy announcements. The BoC's pauses on the policy interest rate hikes reflected its view that past interest rate hikes have resulted in subdued consumption and weaker demand for housing and durable goods, and has cooled business investment. However, the BoC also stated that the labour market remained tight with wage pressures persisting and progress toward price stability slow, noting that it would raise interest rates further if necessary.

In its Monetary Policy Report, released on October 25, 2023, the BoC projected that inflation would stay around 3.5 per cent until mid-2024, easing to approximately 2.5 per cent in the second half of 2024, and return to its target of 2 per cent in 2025. The October projection reflects a higher inflation outlook in the near-term compared to its July projection, where inflation was expected to remain around 3 per cent until mid-2024, gradually returning to the 2 per cent target by mid-2025.

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Economic Review and Outlook

Chart 2.14   Interest Rate Forecasts

 

Outlook

Both the U.S. Federal Reserve and the Bank of Canada anticipate that further interest rate hikes may be required if inflation persists, noting that adjustments to rates will be based on economic data.

Based on the average of six private sector forecasts as of October 11, 2023, the Ministry assumes that the U.S. federal funds rate will average 5.20 per cent in 2023 and 5.22 per cent in 2024. By comparison, the Bank of Canada's target for the overnight rate is expected to average 4.74 per cent in 2023 and 4.61 per cent in 2024.

The Canadian three-month Treasury bill interest rate is expected to average 4.81 per cent in 2023 and 4.52 per cent in 2024, according to the same six private sector forecasters. Meanwhile, the 10-year Government of Canada bond rate is assumed to average 3.42 per cent in 2023 and 3.46 per cent in 2024.

Table 2.4 Private Sector Canadian Interest Rate Forecasts

	3-month Treasury Bill				10-year Government Bond
Average annual interest rate (per cent)	2023		2024		2023		2024
BMO		4.81		4.91		3.46		3.64
CIBC		4.81		4.35		3.39		3.20
National Bank		4.80		4.47		3.39		3.22
RBC		4.81		4.64		3.43		3.53
Scotiabank		4.82		4.50		3.38		3.51
TD		4.81		4.22		3.47		3.66
Average (as of October 11, 2023)		4.81		4.52		3.42		3.46

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Economic Review and Outlook

Exchange Rate

During the first ten months of 2023, the Canadian dollar has been broadly stable against the US dollar, averaging 74.2 US cents and ranging between a low of 72.1 US cents and a high of 76.2 US cents. The fluctuations were partly due to changes in energy prices, as well as the market's perception of U.S. and Canada's economic growth forecasts.

Chart 2.15   Private Sector Expectations for the Canadian Dollar

 

* Based on the average of private sector forecasts. First Quarterly Report 2023 as of July 21, 2023 and Second Quarterly Report 2023 as of October 11, 2023.

Outlook

Based on the average of six private sector forecasters as of October 11, 2023, the Canadian dollar is expected to average 74.2 US cents in 2023 and 74.9 US cents in 2024.

Table 2.5 Private Sector Exchange Rate Forecasts

Average annual exchange rate (US cents/Canadian $)	2023		2024
BMO		74.3		76.4
CIBC		74.0		74.2
National Bank		74.0		72.2
RBC		74.0		73.1
Scotiabank		74.6		79.0
TD		74.1		72.6
Average (as of October 11, 2023)		74.2		74.9

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Table 2.6.1 Gross Domestic Product (GDP): British Columbia

					Forecast
	2021		2022		2023		2024
Gross Domestic Product at Market Prices:
– Real (chained 2017 $ billions)		311.1		322.9		326.1		328.6
(% change)		7.1		3.8		1.0		0.7
– Nominal (current prices, $ billions)		355.9		395.2		407.5		421.7
(% change)		15.8		11.0		3.1		3.5
– GDP price deflator (2017 = 100)		114.4		122.4		124.9		128.3
(% change)		8.1		7.0		2.1		2.7
Real GDP per person (chained 2017 $)		59,530		60,277		59,095		58,100
(% change)		6.0		1.3		-2.0		-1.7
Real GDP per employed person
(% change)		0.9		0.6		-0.4		0.1
Unit labour cost' (% change)		5.2		5.7		5.1		4.4
Components of Real GDP at Market Prices (chained 2017 $ billions)
Household expenditure on goods and services		192.4		200.1		202.5		206.8
(% change)		7.0		4.0		1.2		2.1
– Goods		79.9		78.3		77.4		77.7
(% change)		6.8		-2.0		-1.1		0.3
– Services		112.5		122.0		125.3		129.4
(% change)		7.2		8.5		2.7		3.3
NPISH2 expenditure on goods and services		4.9		5.1		5.3		5.4
(% change)		3.3		3.6		2.9		2.6
Government expenditure on goods and services		58.1		60.5		61.7		59.8
(% change)		6.2		4.1		1.9		-3.0
Investment in fixed capital		87.0		85.1		88.4		90.3
(% change)		10.7		-2.1		3.8		2.2
Final domestic demand		342.6		350.7		357.8		362.4
(% change)		7.8		2.4		2.0		1.3
Exports of goods and services		113.8		121.1		119.1		119.2
(% change)		6.4		6.4		-1.6		0.1
Imports of goods and services		145.3		156.9		157.0		159.5
(% change)		8.8		8.0		0.0		1.6
Inventory change		1.0		9.3		0.0		0.1
Statistical discrepancy		0.1		0.1		0.0		0.0
Real GDP at market prices		311.1		322.9		326.1		328.6
(% change)		7.1		3.8		1.0		0.7

¹ Unit labour cost is the nominal cost of labour incurred to produce one unit of real output.

² Non-profit institutions serving households.

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Economic Review and Outlook

Table 2.6.2 Selected Nominal Income and Other Indicators: British Columbia

					Forecast
	2021		2022		2023		2024
Compensation of employees1 ($ millions)		172,036		188,707		200,327		210,707
(% change)		12.7		9.7		6.2		5.2
Household income ($ millions)		305,540		326,447		348,419		363,024
(% change)		5.8		6.8		6.7		4.2
Net operating surplus ($ millions)		48,809		53,368		46,793		43,701
(% change)		35.1		9.3		-12.3		-6.6
Retail sales ($ millions)		104,653		107,889		108,652		111,033
(% change)		12.6		3.1		0.7		2.2
Housing starts (units)		47,607		46,721		47,362		42,942
(% change)		26.2		-1.9		1.4		-9.3
Residential sales ($ millions)		115,000		80,298		72,696		81,311
(% change)		57.4		-30.2		-9.5		11.8
Residential sales (units)		124,064		80,589		74,965		81,913
(% change)		32.9		-35.0		-7.0		9.3
Residential average sale price ($)		926,944		996,392		969,736		992,650
(% change)		18.5		7.5		-2.7		2.4
Consumer price index (2002 = 100)		136.1		145.5		151.3		155.4
(% change)		2.8		6.9		4.0		2.7

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

Table 2.6.3 Labour Market Indicators: British Columbia

					Forecast
	2021		2022		2023			2024
Population (thousands at July 1)		5,227		5,356		5,519	a		5,655
(% change)		1.0		2.5		3.0			2.5
Net migration (thousands)
– International1,4		73.9		142.2		174.1			125.7
– Interprovincial4		31.0		6.5		-4.8			-3.6
– Total		104.9		148.7		169.3			122.1
Labour force population2 (thousands)		4,350		4,426		4,519			4,612
(% change)		1.2		1.7		2.1			2.1
Labour force (thousands)		2,852		2,881		2,940			2,979
(% change)		3.3		1.0		2.0			1.3
Participation rate3 (%)		65.6		65.1		65.1			64.6
Employment (thousands)		2,664		2,748		2,786			2,804
(% change)		6.2		3.2		1.4			0.6
Unemployment rate (%)		6.6		4.6		5.2			5.9

¹International migration includes net non-permanent residents and returning emigrants less net temporary residents abroad. 

² The civilian, non-institutionalized population 15 years of age and over. 

³ Percentage of the labour force population in the labour force. 

⁴ Components may not sum to total due to rounding.

^aActual

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Table 2.6.4 Major Economic Assumptions

					Forecast
	2021		2022		2023		2024
Real GDP
Canada (chained 2012 $ billions)		2,103		2,176		2,200		2,211
(% change)		5.0		3.4		1.1		0.5
U.S. (chained 2017 US$ billions)		21,408		21,822		22,280		22,459
(% change)		5.8		1.9		2.1		0.8
Japan (chained 2015 Yen trillions)		541		547		556		560
(% change)		2.2		1.0		1.8		0.7
China (constant 2010 US$ billions)		12,775		13,157		13,815		14,395
(% change)		8.4		3.0		5.0		4.2
Euro zone1 (chained 2015 Euro billions)		11,349		11,738		11,785		11,844
(% change)		5.9		3.4		0.4		0.5
Industrial production index (% change)
U.S.		4.4		3.4		0.1		-0.5
Japan		5.6		0.1		-1.3		1.2
China		10.9		3.8		4.0		3.9
Euro zone1		8.9		2.3		-1.9		0.4
Housing starts (thousands)
Canada		271		262		230		210
(% change)		24.5		-3.4		-12.2		-8.7
U.S.		1,601		1,553		1,390		1,370
(% change)		16.0		-3.0		-10.5		-1.4
Japan		856		860		825		835
(% change)		5.0		0.4		-4.0		1.2
Consumer price index
Canada (2002 = 100)		141.6		151.2		157.1		161.3
(% change)		3.4		6.8		3.9		2.7
Canadian interest rates (%)
3-month treasury bills		0.12		2.30		4.81		4.52
10-year government bonds		1.36		2.77		3.42		3.46
United States interest rates (%)
3-month treasury bills		0.04		2.08		5.27		4.98
10-year government bonds		1.44		2.95		3.96		3.97
Exchange rate (US cents / Canadian $)		79.8		76.8		74.2		74.9
British Columbia goods and services
Export price deflator (% change)		17.1		14.5		-2.0		1.9

¹Euro zone (20) is Austria, Belgium, Croatia, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Portugal, Slovakia, Slovenia, and Spain.

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Economic Review and Outlook

Provincial Economic Accounts Update

Statistics Canada released its estimates of provincial annual GDP for 2022 on November 8, 2023.

In 2022, B.C.'s real GDP increased by 3.8 per cent, the fourth fastest growth among provinces (behind Saskatchewan, Alberta, and Ontario), following an increase of 7.1 per cent in 2021. Overall, the Canadian economy also increased by 3.8 per cent in 2022, following an increase of 5.3 per cent in 2021.

Chart 1 – Real GDP in Canadian provinces

 

Many of B.C.'s real GDP expenditure categories grew in 2022, led by increases in household spending on services, inventory investment, exports of services, and government spending, partly offset by higher imports and lower residential investment. Household final consumption expenditures increased by 4.0 per cent in 2022. The gains were led by an 8.5 per cent increase in household spending on services, partially offset by a 2.0 per cent decrease in household spending on goods. Overall, gross fixed capital investment declined by 2.1 per cent in 2022, mainly driven by decreases in investment in residential structures (-11.7 per cent) and machinery and equipment (-2.7 per cent). Government spending (Federal, Provincial, Local and Aboriginal) rose by 4.1 per cent in 2022. Exports of goods and services were up by 6.4 per cent in 2022. Total exports were outpaced by an increase in imports of goods and services, which rose by 8.0 per cent. Imports and exports of services rebounded in 2022, partly reflecting increased travel.

Chart 2 – B.C. GDP by Expenditure

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Economic Review and Outlook

Real GDP

Annual growth in B.C.'s real GDP from 2019 to 2022 is illustrated in Chart 3. The latest data incorporate historical revisions back to 2020. B.C.'s real GDP growth for 2021 was revised up to 7.1 per cent from 6.1 per cent, while the change in 2020 was minor.

Chart 3 – B.C. real GDP

 

Nominal GDP

Chart 4 depicts B.C.'s nominal GDP levels in recent years. Nominal GDP increased by $39.3 billion (or 11.0 per cent) in 2022, after increasing by $48.5 billion (or 15.8 per cent) in the previous year. Statistics Canada's latest release also incorporated historical revisions. The revised level of nominal GDP in 2021 is now estimated to be $355.9 billion, 1.5 per cent higher than the previous estimate of $350.6 billion.

Chart 4 – B.C. nominal GDP

 

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