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Risks to the Economic Outlook

The balance of risks to the current economic forecast is to the downside. Primary downside risks in the short-term include:

  • The US performs worse than expected, or enters into recession.
  • The credit crisis in financial markets becomes worse than anticipated due to the onset of a US recession, or a worse than expected fallout from the subprime mortgage crisis.
  • The Canadian dollar rises above its forecasted values, putting further strain on BC’s trade sector.
  • Credit to small businesses in the US is restricted due to further tightening of lending standards in financial markets.
  • Developing economies such as China and India are not as well buffered from a US slowdown as expected.

Medium-term risks to the economic forecast include:

  • The possibility of a prolonged US slowdown.
  • The Canadian dollar may rise higher (lower) than expected, leading to unanticipated weakness (strength) in BC’s trade sector.
  • Skilled labour shortages lead to increased wage inflation or slower production.
  • BC’s interprovincial migration weakens and its skilled labour shortages become worse.
  • Commodity prices decline more sharply than forecast or become more volatile.

Table 4.8.

Table 4.9.1.

Table 4.9.2.

Table 4.9.3.

Table 4.9.4.

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