by By Richard Rees, FCPA, FCA
B.C.’s economic performance was relatively strong in 2015. Both capital investment and private non-residential building investment had favorable gains, and combined with low provincial debt, and a strong credit rating and economic outlook, the province should remain an attractive place to invest in 2016 and likely into 2017.
Looking at capital investment, at the end of 2015, our province’s Major Projects Inventory was valued at $452.5 billion, which is up compared to the total value of $396 billion in 2014. The value of proposed projects also increased to $341.6 billion from $285 billion. However, proposed liquefied natural gas (LNG) projects account for the majority of these projects, and it is uncertain if and when any LNG projects will receive approval and proceed with development. For projects under construction, the total value dipped from $80 billion in 2014 to $75.4 billion at the end of 2015.
While major project construction slowed somewhat, private non-residential building construction activity continued to increase. From 2010 to 2015, the value of B.C.’s private non-residential building construction industry increased by 16.6 per cent, with a one year gain of 2.8 per cent in 2015, to reach $3.96 billion. Private sector investment in non-residential infrastructure is a good indicator of confidence in B.C’s economic prospects and whether or not investors are inclined to accept the risks of investing here.
The gains were largely buoyed by commercial investment. In 2015, commercial investment accounted for roughly 85 per cent, or $3.4 billion, of total private sector non-residential building construction in B.C. Industrial investment, which accounted for the remaining 15 per cent, has been volatile over the past decade, particularly during the global financial crisis in 2009. Although industrial investment did see an increase between 2010 and 2013, it declined between 2014 and 2015, falling by 4.3 per cent to $544.5 million.
Looking at government spending, our province was one of two noted in the annual CPABC BC Check-Up report that were able to declare a surplus in 2015, and B.C. is expecting surpluses for 2016 and 2017. The province’s net debt rose to $40.97 billion in 2015, which increased the government debt-to-GDP ratio to 16.7 per cent, but this was significantly lower than Ontario and Canada as a whole (39.6 per cent and 31.2 per cent respectively). B.C.’s net debt-to-GDP is expected to decline over the next three fiscal years, reaching 16.2 per cent in 2018/19, due to continued judicious spending and conservative assumptions about the provincial economy.
Overall, B.C. remains in solid fiscal shape and while it would benefit economically from progress on some of its major construction projects, the increase in private non-residential building bodes well for B.C’s economic prospects moving forward. In addition, as a province with one of the lowest government debt-per-capita ratios in the country, and a high credit rating, it is clear that B.C. should remain an attractive place for investment.