British Columbia will need continued prudent fiscal management to weather global economic uncertainty and respond to challenging budget pressures to meet its commitment to eliminate the deficit in 2013-14, Finance Minister Kevin Falcon said last week with the release of the first quarterly report.
While B.C. has seen moderate improvement in some economic indicators through the first half of 2011, the Province is maintaining its prudent forecast of two per cent real GDP growth in 2011 and moderating its 2012 forecast to 2.3 per cent due to the worldwide deteriorating economic climate.
Revenues are forecast to increase by an average of just 2.8 per cent annually over the next two years, compared to the Budget 2011 projection of 3.3 per cent. Lower natural resource revenue and commercial Crown corporation income, partly offset by improvements in taxation and other revenue sources, mean cumulative losses projected at $537 million over the three years of the fiscal plan before the impacts of returning to the PST are factored in.
The decision to extinguish the HST and revert back to the PST is forecast to increase the cumulative losses to more than $2.3 billion by 2013-14, with further losses anticipated in the following year not covered by the current fiscal plan. This includes $1.6 billion in 2011-12 associated with reimbursing the federal HST transition funding and a more than $700 million loss from lower tax revenue and increased spending over the three years ending 2013-14.
The added costs and lower revenues mean the deficit is now forecast at nearly $2.8 billion in 2011-12 and $805 million in 2012-13. Government must reduce the deficit by $458 million in 2013-14 to balance the budget as required by law.
Government will continue to protect health care and education, while taking steps to control spending. All ministries, agencies and Crown corporations are looking at ways to reduce costs and manage their spending pressures.
The province will consult with British Columbians on their priorities for Budget 2012. As part of this process, the all-party Select Standing Committee on Finance and Government Services will hold public meetings and seek input through the annual budget consultations beginning in September.
For more details on the pre-budget consultations please visit:
Ministry of Finance