Vancouver Island’s economy is at a critical point and hard decisions need to be made to ensure long-term prosperity. This is according to Susan Mowbray, partner at MNP, who delivered the State of the Island economic report at the annual Vancouver Island Economic Alliance summit on Tuesday, Oct. 28, in Nanaimo. “Last year, we talked about how things are going to be OK in the short term, but we need to do something in the longer term,” she said. “I would say today we’re kind of at the beginning of where we actually really need to do something because the foundation upon which our prosperity is built is starting to crumble and we’re starting to see those indicators show that. That’s not just because of what’s happening with the U.S. administration, this is primarily because of past choices we’ve made.” Since the pandemic financial bounce-back, B.C.’s annual economic growth has been a “really low” 1-1.5 per cent, Mowbray said, though there was a small increase this year compared to the previous year. Vancouver Island continues to have a lower GDP than the rest of the province. “We’re not producing a lot of things that are bringing money into the province from the outside, but we’re producing things to support the local population – this is great in the short term.” Vancouver Island has one of the lowest unemployment rates in Canada, but participation rates are starting to marginally decline, which Mowbray said suggests the beginning of weakening economic conditions “and people are getting discouraged.” “People aren’t able to find jobs so rather than keep looking, they are exiting the labour market.” She reported that most of the employment growth has been in public sectors such as education, health care, social assistance and government. From 2006-2024, the share of employment in the public sector grew from 26 per cent to 34 per cent, while the private sector shrank from 55 to 51. Goods industries such as forestry, agriculture and mining went from 19 to 15 per cent. Mowbray had a mixed outlook of the Island’s major sectors, with forestry down year-over-year with an uncertain outlook, and the farmed salmon sector similarly uncertain. “Those resource sectors that have traditionally been the backbone in the economy are continuing to shrink, with weak market conditions, increases in softwood tariffs by the U.S. and just regulatory strangulation is hammering our forest industry.” Conversely, tourism is doing well as visitor numbers trend up along with occupancy rates, presenting a stable outlook. Mowbray said there are indications of continuous growth in the knowledge economy, such as in professional jobs, film, scientific and technical services, as well as growth in information and culture. Construction of residential homes throughout B.C. showed a decline to $9 billion in 2024 from $10 billion in 2023. “Even though we’re talking about building all this housing, we’re not actually building all this housing,” she explained. “We’re seeing a lot of projects get cancelled, a lot of the insolvencies we’re seeing in businesses are construction companies. So we’re not building housing that is going to help us to address our housing affordability challenges because we’re actually seeing construction start to decline.” Housing costs have also increased, with rents going up between 40-60 per cent on the Island over the past five years. In Nanaimo, the average cost of rent went from an average of $1,166 to $1,775, while in Victoria it went from $1,454 to $1,995. “If you were graduating from post-secondary this spring, you would probably have a really hard time finding a job because firms weren’t hiring, and if you found a job it probably wasn’t in your sector. Those people are struggling already because of high housing or rental costs, and that’s going to have some serious implications in the future of not being able to get started, get out of their parents’ basement and start to work, develop their skills and build up some assets.” Looking ahead, Mowbray said over the next 25 years, population growth is expected to slow, increasing about 13 per cent over that time frame, while an aging population will shift the 70-plus demographic from just over one-fifth of the population to almost a quarter of the population by 2045. “That means we need to be thinking of infrastructure investments and how we address things like housing needs, the provision of health care and transportation services as well as how we respond to a changing climate,” Mowbray said. “Just because Trump has decided climate change doesn’t exist, doesn’t mean the climate isn’t changing, doesn’t mean we’re not facing forest fires and rising sea levels and all those different things that we’ve been talking about for the last few years.” She explained all those considerations will be fundamental in building economic resilience in Vancouver Island’s economy, regardless of trading partners. Potential economic edges Mowbray suggested were the development of technology infrastructure on the Island, and opportunities that may come through Indigenous reconciliation. Following the event, Mowbray told the News Bulletin the goods sector and goods production will always be part of the economy, but moving forward, Vancouver Island has high-value opportunities in the development of technology and meeting the needs of the population in ways that could also be turned into export goods. Potential opportunities may lay in food processing and food security to produce more food locally that can be exported to other parts of Canada or internationally. “We should be thinking about this as an opportunity. It’s scary but we should be thinking about this as an opportunity to lay the foundation for a prosperous future.” The economist said hard decisions need to be made, such as accepting the trade-off that to get affordable housing means the cost of housing will have to go down across the board, resulting in homeowners losing money. Additionally, social programs may need to be cut, she suggested, as the “government debt is not at a level we can sustain going forward.” VIEA’s State of the Island economic summit continues Wednesday and Thursday, Oct. 29-30.
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