the world economy and bc presented to mortgage investment association of bc june 21, 2011 by bernie...
TRANSCRIPT
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The World Economy and BCpresented to
Mortgage Investment Association of BC
June 21, 2011 by
Bernie MagnanAssistant Managing Director and Chief Economist
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Background
• Factors considered in Economic Forecast– Previously looked at United States and
Canadian Economies– Some attention paid to Japan and Europe– Now need to consider other major world
economies – especially European Union, BRIC countries (Brazil, Russia, India and China)
– Canadian Domestic Factors– Provincial Factors
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Background (cont.)
• United States Still Biggest Economy - > $14 Trillion GDP
• Japan, Germany, South Korea, other Euro nations still impact world economy
• Increased interconnectivity of World Economies
• Sovereign Debt• Consumer Confidence• Residential and Commercial construction• Commodity Prices
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Background (cont.)• Major Recession Factors
– Unregulated Lending in US Market – Especially Housing (Sub Prime, 100% Loans, ‘NINJA’ Loans, Extended Credit)
– Creation of Little Understood Structured Financial Products
– Lack of Financial Regulation
– Overbuilt US residential housing mkt (on spec)
– Sovereign debt/social support (especially in EU)
– US Budget and Current Account Deficits
– Repackaging of High-Risk Products
– Hedge and Derivative Calls
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Real GDP (Projected Average Percentage Change)
-8.0%-6.0%-4.0%-2.0%0.0%2.0%4.0%6.0%8.0%
10.0%12.0%
2009 2010 2011 pro 2012 Fcst
US Canada Mexico JapanChina India Euro Area Britain
Source – Economic and Financial indicators – The Economist
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Commodity Prices (2008/2009)
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Commodity Prices (2010-11)
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Canadian Economy
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Canadian Economy
Positive Factors• 11 Years of Budget Surpluses• Budget Debt down by $90 Billion (to $458 Billion)• Debt-to-GDP Lowest Among G7 Countries• Strong Financial System• Stable Housing Market• Positive Immigration• Stimulus Spending ($60 Billion Over 2.5 Years)
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G7 COMPARATIVE NET DEBT-TO-GDP RATIOSCANADA’S TURNAROUND - 2ND WORST TO BEST
20%
30%
40%
50%
60%
70%
80%
90%
100%
110%
120%
130%
140%
150%
160%
170%
Canada U.S. U.K. France Germany Japan Italy
1995 2008
Source: Department of Finance 6
Net Debt-to-GDP Ratio
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G7 COMPARATIVE NET DEBT-TO-GDP RATIOSCANADA’S TURNAROUND (cont.)
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Canadian Economy(cont.)
Negative Factors• Aging Demographic• Labour and Skills Shortages• Lack of Investment in Productivity and
Innovation• Canadian Dollar at Par With US $• $101 Billion Deficit Increase Over Two Years
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Canadian Economic Issues
• Impact of World Financial Liquidity• Border Access
– Movement of Business Professionals– New Border Transportation Charges – Truck
and Rail– Increased Security Requirements
• Balance of Payments• Impact of US Economic Recovery• Commodity Pricing• Federal Budget
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British Columbia Economy
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Taxpayer Supported Debtas Per Cent of GDP and Per Capita
12%13%14%15%16%17%18%19%20%21%22% 19.1
20.621.3
20.6
18.2
16.114.4 14.0
13.316.2
17.5 17.8
Per Cent GDP
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British Columbia Economy
Positive Factors• Low Cost of Electrical Energy• 2010 Olympics• Skilled Workforce• Gateway to Pacific Rim• Population In-migration• Natural Gas Play• Commodity Prices
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British Columbia Economy (cont.)
Industry Outlooks• Forestry• Mining• Energy• Transportation and Warehousing• Finance and Real Estate• Health Care• Tourism
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British Columbia Economy (cont.)
Statistics• Population Growth – 1.6%• Employment – Flat to Small Growth• Canadian Dollar Volatility - Par• Gas prices - Volatile• Lumber Prices - Variable• Inflation – 2.7%• Unemployment - 7.6%• Bank Rate – 1.0% (end of year)
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Forecast
• Canada + 2.9%
• British Columbia + 2.4%
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Vancouver Region Impacts
• ‘Downtown’ British Columbia
• Commodity Prices and World Demand
• In-migration
• Regional Growth Strategy– Land Availability– Demand/Densification– Industrial/Commercial Land Requirements– Transportation
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Questions ???