Canada's British Columbia lowers budget surplus forecast

VANCOUVER (Reuters) - The Canadian province of British Columbia cut its 2017-18 budget surplus forecast to C$190 million ($148 million), due to tax adjustments and as the cost of fighting its worst-ever wildfire season bites, the provincial Finance Minister said on Tuesday.

FILE PHOTO - Carole James signs in as Finance Minister and Deputy Premier next to B.C. Lieutenant Gover­nor Judith Guichon at Government House in Victoria, B.C., Canada July 18, 2017. REUTERS/Kevin Light

The government had estimated a budget surplus of C$246 million in September.

Provincial revenue is forecast to decline due to weaker 2016 personal and corporate income tax returns, and lower revenues at the province’s auto insurance body, ICBC, Carole James told reporters at the release of British Columbia’s second quarter fiscal update.

“As we work to prepare a balanced budget 2018, I am mindful of a number of fiscal pressures in the second quarter, including the cost of fighting wildfires this season and the continued losses from ICBC,” James said.

Firefighting costs during the worst wildfire season on record rose by C$152 million in the quarter, which runs from July to September. The expected full year cost is C$658 million.

Bright spots in the report included job growth, which at 3.6 percent year-to-date is the fastest among Canada’s provinces. Unemployment, at 5.3 percent, is the lowest in the country.

British Columbia’s economy is driven by the real estate, rentals and leasing sector, followed by wholesale retail and trade.

Home to two of Canada’s most expensive housing markets in Metro Vancouver and Victoria, it is suffering from a housing affordability crisis.

James told reporters that the province is working on a comprehensive housing strategy, including tax options to address affordability and speculation in real estate, and a review of the foreign buyer tax, to be unveiled as part of the February budget.

The New Democrat government, which took office in July with the backing of the Green Party, has taken a spending approach that directly contrasts the previous Liberal government’s policy of running large surpluses.

The Liberals had forecast a surplus of C$2.8 billion for the year in June, driven by stronger-than-expected economic growth. The newly elected government said in September it would use much of that surplus to fund new housing measures and to halve medical service premiums.

“Good fiscal management is making sure the economy is strong and the benefits of that strong economy are felt by all British Columbians,” James said.

The government left unchanged its September forecasts for economic growth at 2.9 percent in 2017 and 2.1 percent in 2018.

($1 = 1.2811 Canadian dollars)

Reporting by Julie Gordon and Nicole Mordant, Editing by Rosalba O’Brien