Canadian softwood lumber is pictured at the Port of Vancouver Lynnterm terminal in North Vancouver, British Columbia on February 13, 2015.Ben Nelms
The B.C. government is counting on a diversified economy to weather the impact of tough times in the energy industry, touting strength in areas such as lumber, tourism and technology.
As British Columbia forecasts its third consecutive balanced budget, Finance Minister Mike de Jong said the province's fortunes look bright even as low oil prices hammer its neighbour Alberta.
The Liberal government, which had been promoting the fledgling liquefied natural gas industry as the main ticket to long-term prosperity, is now playing down LNG and instead pointing to a wide range of promising sectors.
"As much as we look forward to reaching final investment decisions to develop LNG, we are at the same time moving forward to support the industries that have for decades supported our families, our communities and our economy," Mr. de Jong said in his budget speech in Victoria.
He predicts a $284-million surplus for the 2015-16 fiscal year, despite a downturn in natural gas prices. While natural gas has traditionally been a reliable business for B.C., the budget forecasts that royalties from the commodity will shrink 36.5 per cent to $344-million in the 2015-16 fiscal year.
Mr. de Jong said economic diversity will more than make up for the weakness in natural gas royalties.
The B.C. government forecasts that the province will show resilience in lumber, tourism, information technology, digital games, software publishing, transportation and food products.
Mr. de Jong noted that B.C.'s merchandise exports to China have soared from 2.3 per cent of the total in 2001 to nearly 20 per cent last year. Lumber is seen as a bright spot not only because of rising exports to China, but a rebound in the U.S. housing market.
Provincial revenue from forestry is forecast to rise 10.3 per cent to $835-million in the 2015-16 fiscal year.
Another driver expected for the B.C. economy will be the continued influx of new residents, notably from countries overseas such as China. The budget predicts a net gain of 46,600 residents to B.C. in 2015, including 36,600 people moving from other countries and 10,000 individuals from other provinces.
A new B.C. hub for exchanging China's currency, the Renminbi, is expected to help B.C. businesses. "The hub is a financial centre sanctioned by China to clear and settle transactions in the Chinese currency, making it easier and less expensive for people here to do business with China," Mr. de Jong said.
The nascent B.C. LNG industry is no longer being portrayed as the great salvation for the province's economy.
"While government continues to meet its LNG commitments and has set the foundation to provide industry with the certainty it needs in evaluating the provincial LNG tax framework, deteriorating global economic conditions in the oil and gas sector may affect the timing of final investment decisions," the province warns in budget documents.
There are 19 B.C. LNG proposals, but analysts caution that there is only room for four at most in the province due to fierce global competition.
During a news conference Tuesday, Mr. de Jong said nurturing the LNG industry is one of the priorities for the government. "We certainly haven't given up. Quite the contrary," he said. "Of course there is some lingering volatility in the energy markets right now that is undoubtedly impacting upon some of those major proponents, to be sure."
In his speech, the B.C. Finance Minister highlighted the importance of the mining industry, though prices are down for many key commodities. "The resurgence of mining continues to be a B.C. success story. Mining exports have more than doubled since 2004. Five new mines have opened since 2011. We've also approved seven mine expansions," he said.
Business leaders expressed support for the budget.
"It's a very important budget in terms of the acknowledgment of the mining industry as a key economic driver in this province," said Karina Brino, president of the Mining Association of British Columbia.
Ms. Brino said that while low coal prices have led to halts in production in northeastern B.C., the mining sector in general has secured a long-term future in the province.
Brent Jang