Operating Context

Home to 5.2 million people, British Columbia (BC) is a major contributor to the Canadian economy. The province accounted for 13.4% of Canada’s total gross domestic product in 2019. Before the pandemic, BC’s economy was performing well relative to other provinces. From 2011 to 2019, BC had the highest average annual growth in real gross domestic product among provinces at 2.9%Footnote 1. Over the same period, employment in BC grew by an annual average rate of 2.3%, faster than any other province, and 1% higher than the overall Canadian rateFootnote 2.

A small, open economy, BC’s prosperity depends on both international and interprovincial trade. In 2020, BC exported $108 billion in goods and services: $46 billion in goods, and $20 billion in services, to other countries; and $15 billion in goods, and $27 billion in services, to other provincesFootnote 3. The province has strengths in diverse industries, including natural resources, transportation, tourism, and technology.

BC’s diversity has in part allowed the province to weather the economic recession caused by the COVID-19 pandemic relatively well. Jobs lost early in the pandemic have largely returned, though sector-specific impacts persist. Overall, BC businesses and organizations employed 53,000 more people in December 2021 than in January 2020. This employment growth of 2.0% is third among provinces and 0.6% higher than the overall Canadian rate. BC’s economy contracted by only 3.4% in 2020, less than the 5.2% contraction of the overall Canadian economy. As of February, the Omicron variant was active in BC and contributing to uncertainty regarding further public health actions and restrictions.

Natural disasters have also had significant impacts on BC communities and businesses in 2021. Floods and related landslides in November 2021 are anticipated to be the most costly natural disaster in Canadian history. Supply chain disruptions caused by damage to transportation corridors in and out of the Lower Mainland not only affect BC's economy, but also have impacts on Canada's economy as a whole given the Port of Vancouver’s role as Canada’s largest port. Other climate disasters are subjecting businesses and local economies in certain areas to stress and financial burden. In June 2021, heat domes killed nearly 600 people in the Lower Mainland. The summer wildfire season was third worst in the province’s history, with impacts concentrated in the Kamloops, Merritt, and Interior regions.

Challenges

BC’s recent growth and stability indicate a solid base and high potential for further growth, but also mask structural challenges and inequities that pose risks to near and long-term prosperity.

Much of BC’s recent growth can be attributed to record levels of non-permanent immigrationFootnote 4, which is beneficial, but not sufficient, for sustained economic growth. Significant capital expenditures from a small number of major projects including LNG Canada, Site C, the Trans Mountain Pipeline, and the Broadway Subway are also providing a temporary boost. Spending on non-residential structures was responsible for 2.2% of BC’s 2.9% real GDP growth in 2019, and reduced the impact of COVID-19 in 2020Footnote 5.

Real estate and construction are also a major driver of growth. In 2019, real estate and construction accounted for 30% of provincial GDP. On average, these sectors account for approximately 20% in other provinces.Footnote 6 Real estate’s size and growth, driven by limited supply of space and other factors, reflects a growing unaffordability for workers and businesses. Typical assessed values of detached homes rose 10-50% from 2021 to 2022 across all BC regionsFootnote 7. In October 2021, Metro Vancouver’s industrial space vacancy rate was 0.5%, the tightest in North America. The scarcity and high cost of industrial land affect the competitiveness and future growth of the gateway economy and local manufacturing businesses.

Other structural challenges include BC’s high proportion of small businesses and limited economic participation for certain demographics.

The BC economy has a higher share of small businesses than other provinces (96.1% relative to 95.6% nationally). Small businesses tend to pay lower wages, are less resistant to shock, and are less likely to export than large businessesFootnote 8.

Participation challenges persist for Indigenous peoples, youth, and women. Indigenous unemployment was 16.5% in August 2021, up from 6.5% in August 2019. As of December 2021, youth aged 15-24 reported an unemployment rate of 11.3% Footnote 9. Wage gaps between women and men persist and are higher for women with intersecting identitiesFootnote 10. One encouraging sign is that, while still far below parity, more enterprises in BC and the territories are owned by women (17.6%) and visible minorities (20.8%) than the national average (15.6% and 12.2%, respectively).

Strengths and Opportunities

Looking to the future, BC’s resource-rich lands and waters; position on the map; natural wonders; and educated, skilled, and creative workforce enable the possibility of a more shared and enduring prosperity. BC can build on its strong base in international and interprovincial goods and service exports, while creating high-wage and long-lasting jobs and becoming more innovative and productive.

Natural resource industries, including downstream processing and manufacturing of BC-produced commodities, account for over 50% of BC’s export baseFootnote 11. Forestry, mining, manufacturing, agriculture, and natural gas industries are key exporters in BC. Opportunities exist to leverage and deepen low-carbon advantages in resource industries. Established sectors (e.g., natural resources and gateway services) contribute significant value and high-quality jobs.

While goods exports will remain important for BC’s future, service exports are significant, diverse, and growing. BC has the highest proportion of service exports of all large provinces at 45%; in contrast, Alberta, Quebec, and Ontario the share of service exports represents around 30%Footnote 12. From 2011 to 2018, BC service exports grew at an average annual rate of 9%, relative to a 6% average annual growth in goods exportsFootnote 13. Transportation “gateway” services are BC’s largest service export at around 13% of total international service exportsFootnote 14. Tourism (mainly accommodation and food services exports) contributed about $8.7 billion to BC GDP in 2019 before international visits severely declined. Education services are BC’s fastest growing service export, growing at nearly 25% year-over-year between 2011 and 2018Footnote 15.

Additional strengths in technical and cultural services are emerging. Today’s smaller high-growth industries represent potential sources of future prosperity. Hi-tech / digital industries employ about 130,000 people in BCFootnote 16 (5% of all jobs) in high-wage jobs and generated about 6.6% of total provincial GDP in 2019Footnote 17. BC is home to Canada’s Digital Supercluster, is part of the Cascadia Innovation Corridor, and has strengths in quantum and artificial intelligence. BC’s life sciences and clean technologies industries employed about 36,000 people (1.3% of all jobs) in 2019Footnote 18 and are emerging areas with high potential for exports. Film and television production employed 30,000 peopleFootnote 19 (1.2% of all jobs) in 2019 and is BC’s fastest growing industry, growing at an average rate of 12.9% per year since 2010Footnote 20.

Going forward, BC’s challenge will be to generate enduring and shared prosperity while addressing unique risks to the provincial economy, leveraging distinct regional and sectoral strengths, and advancing national goals associated with policy objectives including climate change, Indigenous reconciliation, inclusive growth, and affordability.

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