BC housing has been humbled

BC housing has been humbled, the forest industry battered and tourism besieged but B.C. is sitting relatively pretty, Scotiabank chief economist Warren Jestin says.

B.C., whose growth rate next year will be a grudging 1.5 per cent, has little to crow about on the surface, Jestin said in an interview.

Still, the Western cluster of B.C., Alberta and Saskatchewan will do much better than trouble-plagued Central Canada, Jestin says.

"Some growth is better than no growth at all," says Jestin, who taught economics at Simon Fraser University in the mid-1970s.

"If you've got to be some place in the country in terms of economic performance, here's about as good as you're going to find."

That doesn't mean life's bound to be sweet. The Lower Mainland housing market will continue to cool, he says.

Job creation will be sluggish in B.C. next year, as it will be across the country, Jestin says.

Economically battered Americans will be cautious about crossing the border despite the lure of a weaker loonie,

"Tourism, I think, over the next year is going to be soft. And that's a big, big industry," Jestin says.

"That's what really brings the growth rate down."

On the good news front for B.C., natural gas prices "have actually been OK" and infrastructure projects have provided stability.

Coal and copper, other key B.C. commodities, have weakened but will strengthen in price when Chinese growth picks up, he says.

The outlook for oil-gasoline prices and prospects for the loonie are on the minds of many Canadians.

Oil may climb to an average of $80 US a barrel next year as emerging markets such as China reignite their fossil-fuel hunger, he says.

"Enjoy gas prices the way they are because in my view as you go into 2010 and beyond they're going back up," Jestin says.

As for the Canadian dollar, it will be all over the map. Scotiabank expects the loonie to average 85 cents US, or lower, in the first half of next year. During the second half, it will likely average between 90 and 95 cents US, he says.

The Canadian currency is being battered by two forces, Jestin says: lower commodity prices and global investors' desire for safety, security and liquidity. Those investors, for the time being, want the big, liquid market -- so they buy U.S. treasury bills.

It also means big daily shifts in the Canadian dollar will continue to occur through the rest of the year and over the winter.

"People are nervous," he says. "Because of what is happening in the U.S. and global markets, it's a wild ride."

On global equity markets, investor nervousness means the enormous daily swings of recent weeks will persist for about the next half-year, Jestin says.

Global stock markets will settle down but investors should get used to more choppiness over the longer term, he says.

That's because many of the big pools of cash are in emerging giants such as China and Russia and smaller countries.

And the U.S.? The downturn in Canada's biggest market will be long and intense, with a drawn-out period of recuperation, Jestin believes.

"It'll probably be mid-year [2009] before the U.S. actually begins to get a little bit more stability," he says. "Through the balance of 2009, 2010, probably you're going to end up with a very slow performance."

In periods of uncertainty, investors are especially eager to hear what the experts think is coming around the corner. But Jestin says the recent turbulence has made predicting tougher than it has ever been in his 35-year career as an economic forecaster.

"What we try to do in our forecasting, and other forecasting shops do the same, is try to figure out across all the noise . . . what's fundamental here and what's not.

"Over the next six months, I think, we're going to have economic decline in the U.S. and probably no growth at best in Canada, on average.

"Trying to be more precise than that, I think, is a mug's game."

(prepared by Paul Luke/Vancouver Province)