Forestry will remain in crisis next year

DAVID F. ROONEY
Revelstoke Times Review

December 12 2007

A weakening US economy, the high Canadian dollar, and labour shortages are moderating the Economic Forecast Council’s outlook for British Columbia, Finance Minister Carole Taylor announced last week.

“British Columbia’s economy will continue to outperform the Canadian average and grow at a healthy rate,” Taylor said in a statement.  “But, clearly, there are challenges that are lowering the economic growth forecast for British Columbia.”

The independent Economic Forecast Council has lowered its 2007 to 2012 average economic growth forecasts for British Columbia.  The council projects BC’s real gross domestic product at 3.1 per cent this year, down from 3.3 per cent in their previous survey.  Over the medium term, growth is forecast at 2.9 per cent for 2009, and 2.8 per cent for years 2010-2012.

BC is currently experiencing strong domestic growth but exports and manufacturing shipments have declined throughout 2007, a result of the high Canadian dollar, combined with falling demand and prices for lumber and natural gas.  Further deterioration in the US economy, volatile commodity prices, the high Canadian dollar, and labour shortages in the construction sector were key factors cited by the council for lowering their average forecast for the province.

MLA Norm Macdonald said in an interview last Thursday that the government urgently needs to address the problems of the forestry sector.

“There are some parts of the province where forestry is going to be a real challenge,” he said.  “A lot of that is due to the pine beetle.  Quesnel and other areas that are heavily impacted by the pine beetle will see their forestry industry decreasing.”

Macdonald accused the BC Liberals of breaking with the ‘social compact’ that the Social Credit and NDP governments had used to ensure that communities didn’t unduly suffer from economic dislocations.

“They believed the principle that governments should support communities in transition,” he said.  “They believed in rural industry and the fact that it was rural communities that produced the wealth that built this province.  What Revelstoke has produced for the province is incredible, not only enough electricity to power two million homes, but wealth from mining and the forestry industry.  Look at Kimberley.  The Sullivan Mine produced over $20 billion (worth of ores).  That is incredible.”

Under the BC Liberals, he said, the inhabitants of the Interior “Have the feeling that when the good times are over they’re being told, ‘You’re on your own.’”

However, he acknowledges that the forestry sectors most immediate problems are due to turmoil affecting the economy of the United States the largest single market for BC timber.

“The strength of the Canadian dollar is a benefit for some areas (of the Canadian economy) but for forestry it’s a real challenge,” he said.  “Housing starts (in the US) are weak right now.  They were probably over-building and there’s an adjustment going on right now.  In the long term that’ll improve the long term that’ll improve but we need to make sure we get through the present situation.”

To a certain extent rural communities will survive.

“We have that rural outlook,” Macdonald said.  “When the times are good everybody prospers and when times are bad everyone helps everyone else.”

Taylor said the economic outlook has consequences for the government’s budget decisions.

“Most importantly, it confirms why it is so important to be prudent,” she said.  “Because we have been cautious with our forecasts, we will be able to sustain the programs and services British Columbians rely on.  But a lower economic forecast will impact our revenue growth, which may limit our budget choices.”

To address the economic challenges, the discussion centered on increasing the labour force, ensuring tax competitiveness, encouraging productivity growth, and taking advantage of BC’s location, population diversity, and natural advantages.  The discussion also turned to climate change where members suggested the province will need to pursue broad-based measures to achieve its greenhouse gas reduction goals.

“To be successful, we can’t simply focus on business and industry,” said Taylor.  “Broad-based measures, like a carbon tax, were seen as one way to help encourage consumers and individuals to reduce their greenhouse gas emissions.  But they also urged caution that any such measures should be sensitive to lower income individuals, to regional differences and, to the extent possible, they should be revenue neutral.”