Plummeting retail sales, dropping corporate profits and massive drops in tax revenues have led to a forecast provincial deficit of $12.5 billion.
The financial update presented by Finance Minister Carole James on Tuesday is the first look British Columbians have had at the provincial coffers since the start of the COVID-19 pandemic.
The financial snapshot is being described as an atypical forecast and is subject to considerable uncertainty and revision.
“There is no question that COVID-19 has changed the way we live day to day. But it has not changed the priorities of government,” James said.
“The pandemic has exposed underlying gaps in our society.”
Based on the current scenario, the province is looking at a 3.9 per cent drop in household income.
British Columbia recently has seen a slight surge in revenues due to a gradual reopening of the provincial economy. But the province is reporting a $999-million drop in personal income tax collected, $973-million decrease in corporate income tax collected and a $1.35-billion drop in provincial sales tax collected.
Commercial Crown corporations have led to an $882-million drop in money to government and taxpayer-supported agencies have sent $869 million less to provincials coffers due to the pandemic.
The deficit also includes $5 billion put aside for relief and $762 million for business relief and tax measures.
Of the $5 billion, the province is putting aside $3.5 billion for immediate financial relief to individuals and businesses and $1.5 billion for a long-term economic recovery plan.
James says the province is not planning on cutting back on government spending to cover the loses. The government is also committing to no direct tax increases to help deal with COVID-19 losses.
“Now is not the time to cut back on supports for businesses and people of British Columbia. The supports are critical for building back the province. We are not looking to pull back because it would not be good for economic recovery,” James said.
“We will make sure that every cent is spend widely.”
Government is forecasting a 15.9 per cent drop off in retail sales and a 27.6 per cent drop in residential sales in 2020. Retail is expected to jump up 8.6 per cent in 2020 and residential sales are expected to rise 9.3 per cent.
Corporate profits are expected to be down 36.4 per cent in 2020 and unemployment is expected to be 11.3 per cent by year’s end.
James says she doesn’t have a “crystal ball” to determine how long the financial uncertainty will last. The province is pointing to future COVID-19 outbreaks either in B.C. or with trading partners, public health measures, consumer confidence and business confidence as elements of uncertainty.