British Columbia’s budget deficit will narrow faster than forecast as the Canadian province returns to surplus in the next two years, Finance Minister Kevin Falcon said.
Canada’s third-most populous province is starting to benefit from signs of economic recovery in the U.S., the destination for about half its exports, Falcon said in an interview in Victoria, British Columbia’s capital.
“That’s giving me confidence to say we can get back to balance by 2013-2014,” he said. “Even though we’re the most diversified economy in Canada, seeing the U.S. showing some improvement was really a tipping factor.”
Falcon, who is scheduled to unveil his first budget today after 5:30 p.m. New York time, said that as recently as November he was concerned a deepening of Europe’s sovereign debt crisis would further delay the U.S. recovery, undermining the western Canadian province’s effort to restore fiscal balance.
The government forecast in a November update that it would have a shortfall of C$3.1 billion ($3.12 billion) in the year ending March 31; C$805 million in 2012-2013 and a surplus the following year.
The current fiscal year’s deficit had originally been forecast at C$925 million. That figure widened to cover the cost of reversing the merger of B.C.’s provincial sales tax and the federal Goods-and-Services tax that was rejected by voters in a referendum in August.
Falcon announced Feb. 17 that the so-called Harmonized Sales Tax, or HST, will be ended by the end of March next year.
“We intend to get back to where we’ve always been, which is outperforming our targets,” Falcon said Feb. 16 in his office at the provincial legislature. “That means in this current fiscal, next year and the year after.”
It’s not yet clear how Falcon will balance revenue with expenses on schedule, said Mary Webb, a Toronto-based senior economist at Bank of Nova Scotia.
“I’ll be looking for him to map out a plan,” Webb said Feb. 17 in a telephone interview. “This is a government that always likes to have a contingency cushion.”
While the theme of the budget will be the need for “real caution and prudence” in government spending, Falcon, who is also deputy premier, said he will emphasize the province’s fiscal strength compared with other jurisdictions.
Triple-A rated British Columbia has a ratio of debt to gross domestic product of 17.5 percent, compared with about 85 percent for France, 120 percent for Italy and 160 percent for Greece, according to B.C. government figures.
British Columbia’s benchmark 5.75 percent bond maturing in January 2039 yields 3.52 percent, or 5 basis points less than comparable debt sold by Ontario, Canada’s most-populous province.
Ontario is grappling with a C$16 billion deficit, a net debt-to-GDP ratio of about 37 percent and an unemployment rate of 8.1 percent. B.C.’s jobless rate was 6.9 percent in January.
The Canadian dollar has traded near parity against the U.S. currency, reducing the competitiveness of Ontario manufacturers. At the same time, British Columbia’s economy has benefited from higher prices for commodities such as copper and metallurgical coal, aiding firms such as Teck Resources Ltd. and Westshore Terminals Investment Corp. The province has been hurt by falling natural gas prices and weak demand for lumber for U.S. home-building.
The next election in British Columbia is scheduled for May 2013. Liberal Premier Christy Clark’s popularity has fallen behind that of opposition New Democratic Party leader Adrian Dix, according to an Angus Reid Public Opinion poll published this month in the Vancouver Sun newspaper.