B.C. Business Matters:
Jock Finlayson >>
A Milestone Looms: BC’s Economy Will Soon Hit $250 Billion
A steadily expanding population and ongoing modest economic growth are combining to propel the value of both spending and production in the province to ever higher levels. As a result, we are on the cusp of a significant milestone: by the end of this year or early in 2016, the value of all measured economic activity in British Columbia will reach one-quarter of a trillion dollars ($250 billion).
This figure refers to aggregate spending or output in the economy, often termed “nominal” gross domestic product (GDP). It differs from “real” or inflation-adjusted GDP, which is calibrated in 2007 dollars and is therefore somewhat smaller than nominal GDP. For example, in 2014 British Columbia’s nominal GDP was $239 billion, whereas “real” GDP, stated in constant 2007 dollars, was about $220 billion.
The growth of nominal GDP captures increases in the volume of production of goods and services ("real GDP") as well as the impact of higher prices (inflation). Nominal GDP in British Columbia is expected to increase by approximately 4% in 2015 from the level of the previous year– putting it just a smidgeon below $250 billion. By the end of the first quarter of next year, nominal GDP will have eclipsed the quarter of a trillion dollar mark.
An expanding population plays a role in pushing up economy-wide spending and production. BC’s population is increasing by about 1.2% per year, a fairly fast rate by Canadian/US standards and well above the rates seen across much of Europe. More people living in the province means an ever greater demand for goods, services and housing – driving the value of consumer spending higher year after year. At the same time, more households also translates into a growing supply of labour and more jobs that pay wages and benefits to the large fraction of the population that is employed. Of course, some portion of our population doesn’t work and is supported by pensions and other non-employment sources of income, but these people also require housing and consume goods and services – many of which are produced and provided by businesses operating within BC.
Jurisdictions with stagnant or declining populations have a harder time generating “economic growth” as defined by government statistical agencies. Japan and Italy are prominent examples of how a flat or declining population can act as a headwind to the growth of economic activity, dampen entrepreneurial wealth creation, and depress demand for housing and other locally provided goods and services. Dynamic economies typically have expanding populations and labour forces as well as household sectors that want more goods and services. Once population growth is removed from the equation, demand tends to grow at a slower pace and national/regional economies can become sclerotic. In the BC context, it is worth noting that the heavily urbanized lower mainland region generally records stronger GDP and employment gains than other parts of the province – mainly because of a faster-rising population and labour force.
A growing population and economy are positive features of the BC business environment from the vantage point of local entrepreneurs and company owners/managers. It is harder to sustain and expand many types of business – export-oriented businesses being the main exception – when the domestic market is fixed in size or shrinking in an absolute sense. Yet that is the reality facing firms and entrepreneurs in many other parts of the developed world.
|BC's Population and Gross Domestic Product in Current Dollars (nominal GDP)|
|2013||4.58 million||$229.7 billion|
|2014||4.63 million||$238.8 billion|
|2015||4.68 million||$248.7 billion|
|2016||4.74 million||$261.7 billion|
|2017||4.80 million||$276.5 billion|
|Source: BC Finance, Central 1 Economics for forecasts.|