COVID-19: B.C. economy could face biggest drop in 70 years if pandemic shutdowns linger: report

Mar 29, 2020

Photo: Wayne Leidenfrost, Postmedia

The B.C. Business Council’s Executive-Vice President, Jock Finlayson.


VICTORIA — B.C.’s hotel, restaurant, retail, entertainment and tourism sectors will be devastated by the coronavirus pandemic, the provincial economy will plunge to levels not seen in almost a century, and 500,000 people could lose their jobs, according to a new analysis. The B.C. Business Council released its full economic projections Friday, which estimate an unprecedented decline of between seven and 12 per cent in province’s gross domestic product in 2020 due to the COVID-19 outbreak.

“There’s about half a million people in retail accommodation, food services, entertainment and leisure, and I would think most of those jobs will be gone in a relatively short period — most of them already are,” said Jock Finlayson, Council Executive Vice-President.

“That’s where the carnage will be most visible and concentrated. But there will be knock-on effects to other industries, where the demand for whatever they produce or sell has declined quite considerably. So you don’t take out thousands of business and hundreds of thousand of jobs without having these knock-on consequences.”

B.C. businesses have been rocked this month by public health orders to ban mass gatherings, stay at home and restrict travel outside the country in an attempt to limit the growth of the coronavirus, which has now spread across much of the world.

The B.C. government said in a statement Friday it’s too early to know the full scope of job losses caused by the COVID-19 outbreak. More than 1.5 million people across Canada have signed up for new employment insurance programs, and millions more are expected.

The Business Council’s report analyzes two scenarios for the B.C. economy in 2020. In the first, a widespread lock-down and closure of non-essential businesses for at least eight weeks would cost the economy $18.3 billion and shrink growth by roughly seven per cent.

“Scenario 1 is dire,” said Finlayson. “It’s almost three times bigger decline in GDP than we saw in 2009 in aftermath of the great recession, but it’s only a little bit bigger than what we saw in 1981-82.”The shuttering of large parts of the economy, plus the massive job losses in a short period of a few weeks, make it different from other past crises as well, said Finlayson.Scenario 2 analyzes a longer shutdown, combined with stringent international travel restrictions for the rest of 2020. That would cost B.C. $45 billion.“It would be a several times bigger drop than we’ve seen in 70 years,” said Finlayson. “It’s a colossal hit to the economy. Unprecedented.”

Among the hardest hit sectors are accommodation services, food and drink establishments, administrative support like legal and accounting services, air transportation, sightseeing transit and guide outfitter businesses, according to the report. Residential and non-residential construction is also expected to decline sharply, as developers scale back building due to uncertainty, leading to more slowdowns in real estate, said Finlayson.“The huge shock to consumers and household net worth may cause people to delay purchasing properties, and developers were already pulling back anyway,” he said. “That one, I think, will drag us down to some extent.”



Film and TV production, which has been a strong part of B.C.’s economy in recent years, could shrink by a third, according to the report. Most productions in the Lower Mainland having already stopped shooting. Creative B.C., the government-created association that promotes the industry, refused to comment on any impact of COVID-19 on the sector Friday.The larger arts and culture stands to be particularly hard hit, with cancelled shows, events and attractions. Tourism Minister Lisa Beare announced Friday a $3 million “resilience supplement” for the sector, in the form of $15,000 supplements in early April.Even once the coronavirus pandemic has passed, the B.C. Business Council predicts people will be too “shell-shocked” by job losses, smaller family incomes, a decline in investment savings and a spike in personal debt to be able to have disposable income available to reinvest in the economy.“People went into this with the highest level of household debt in history,” said Finlayson. “So we think consumers are not going to go back and start spending just like they did in 2019.”

The federal government announced Friday a boost to its wage subsidy program for businesses to 75 per cent from 10 per cent in an attempt to get employers to keep their staff when possible rather than execute mass layoffs. That’s on top of billions in enhanced employment insurance programs, a $2,000 a month aid package for the unemployed, a one-time $1,000 B.C. aid cheque a and $500 monthly provincial rent supplement.

The news was praised by Finlayson and others.

“Today’s announcement by the federal government will provide much needed relief and help business owners and entrepreneurs sleep a little better tonight,” said Bridgitte Anderson, CEO of the Greater Vancouver Board of Trade.

The federal package Friday also included interest-free loans that are partly forgivable for small businesses.

(News Source: Vancouver Sun/Post Media, Rob Shaw)