Canada Economy Facts
Economical overview
Canada is a rich country with huge natural resources, well-educated manpower and high-tech industries. The manufacturing industry is still important to the country’s economy, but the service sector has grown rapidly. It now accounts for nearly three-quarters of the gross domestic product (GDP) and employs nearly eight out of ten Canadians. Mining and oil and gas extraction generate large export earnings. Agriculture still plays a central role for the economy, especially in the prairie provinces.
Canada has a significant financial sector, including insurance companies and real estate agents that employ over a million people. The banking sector is dominated by six major groups, all but one having their base in Toronto. The Canadian banking system is, according to a report from the World Economic Forum 2017–2018, one of the most stable in the world. In the context of the international financial crisis of autumn 2007, the Canadian banks came out relatively mildly, as Canada, unlike many other Western countries, tightened the rules on the financial market in the 1990s.
- Countryaah.com: Major imports by Canada, covering a full list of top products imported by the country and trade value for each product category.
At the end of the 1980s, Canada went into a deep recession. The then Liberal government began a tough austerity policy in 1995 and in a few years could reverse the trend. In the 1990s, it gained traction from the strong US economy, not least because exports accelerated after Canada, the United States and Mexico concluded a free trade agreement in 1993, Nafta. In 1997, a surplus was achieved in the state budget. The central government finances then ended up with nine consecutive years. Parts of the surplus were used to pay off the national debt. Low interest rates and high demand for Canadian goods from the US, together with high world market prices for oil, natural gas and various minerals, led the economy to grow steadily until the international financial crisis 2007/2008. In 2009, GDP fell by a few percent.
- Abbreviationfinder.org: Check this abbreviation website to find three letter ISO codes for all countries in the world, including CDA which represents the country of Canada. Check findjobdescriptions to learn more about Canada.
In 2010, the numbers were again positive, but growth slowed down significantly in 2015, due to falling world market prices of raw materials, not least oil and gas (oil prices fell from $ 100 a barrel at the end of 2014 to $ 30 a barrel a year later). This hit particularly hard against the oil-producing province of Alberta whose GDP shrank by a total of just over 7 percent in 2015-2016 (see below). However, a low exchange rate for the Canadian dollar against the US meant that other economic sectors, such as the forest industry, fared better. High private consumption (as a result of a new and more generous child allowance, increased employment and rising wages) and a construction boom in large cities such as Toronto and Vancouver contributed to positive growth figures for the country as a whole. Inflation was also low.
Stimulus policy, growth and budget deficits
The Liberal government, which took office at the end of 2015, invested in boosting the economy through stimulus policies, which included, among other things, major investments in new infrastructure, not least in public transport. One of the goals was to increase productivity, which is relatively low in Canada compared to other Western countries, and to create a climate that favors the development of technological innovations. To finance this, the government would allow significant deficits in the state budget until 2019 (see Current policy), but the deficits were larger than planned. One reason for this was that the money received through tax increases for high-income earners was not enough to pay for the tax cuts that were made for the middle class. In connection with the presentation of the budget for 2018/2019, a new goal was set: that the deficit should be down to 12 billion Canadian dollars in the financial year 2022/2023, compared with almost 18 billion Canadian dollars 2016/2017.
Despite a number of favorable signs, such as relatively high GDP growth and falling unemployment, 2017 saw several signs of concern for the future. These include continuing problems in the oil and gas sector, as well as uncertainty about how the economic policies pursued by Donald Trump in the US will affect Canada. For example, the United States has decided to reduce the tax on investments from just over 24 percent to just under 19 percent, while the corresponding tax in Canada is slightly above 20 percent. There was also uncertainty about what would happen to the cooperation within Nafta, which in 2019/2020 was converted to the USMCA (see Foreign Policy and Defense).
In any case, foreign investment in Canada has declined in recent years. In 2017, foreign companies sold more Canadian companies than they bought for the first time in ten years. Among other things, Equinor (formerly Statoil) and Shell sold its oil sands companies. Several assessors also warn of a housing bubble in the larger cities. Many Canadian households have borrowed large sums to buy their home, which could have serious consequences for the economy if interest rates rise and house prices fall.
Provinces’ economies
The economic conditions vary between different regions. Economically strong is Ontario, which in 2015 accounted for almost 40 percent of the country’s GDP, and Québec, which accounted for just over 20 percent. In these provinces, a large part of the country’s manufacturing industry is located.
In third place comes Alberta, which contributed just over 16 percent of Canada’s GDP that year. There, high income from gas and oil extraction has meant that the province had for many years the country’s highest growth figures, and the provincial government was able, among other things, to abolish all VAT on goods. Livestock management and grain cultivation are other important industries in Alberta and the other two prairie provinces of Manitoba and Saskatchewan.
Falling oil prices from the fall of 2014 hit the Alberta economy hard, with rapidly rising unemployment and large holes to fill the provincial budget. Saskatchewan also had financial problems, while Manitoba, whose business sector has a broader base, fared better. As of 2017, both Alberta’s and Saskatchewan’s growth figures have been on the plus again.
In British Columbia, which accounted for almost 13 percent of Canada’s GDP in 2015, the forestry, mining and energy sectors (oil, gas and hydropower) are the most important industries.
The crisis in the fishing industry in the 1990s hit hard on the provinces along the Atlantic coast, New Brunswick, Prince Edward Island, Nova Scotia and Newfoundland and Labrador, but a recovery began in the 00s, when oil recovery started and a new venture was made on nuclear power (in New Brunswick). Agriculture, mining, chemical industry and tourism are other important industries.
The federal government has transferred more and more information to the provinces, making it more difficult for the provincial governments to get their budgets together.
FACTS – FINANCE
GDP per person
US $ 46 211 (2018)
Total GDP
US $ 1 712 510 million (2018)
GDP growth
1.9 percent (2018)
Agriculture’s share of GDP
1.7 percent (2015)
Manufacturing industry’s share of GDP
10.3 percent (2015)
The service sector’s share of GDP
66.7 percent (2015)
Inflation
2.0 percent (2019)
Government debt’s share of GDP
89.9 percent (2018)
Currency
Canadian dollar
Merchandise exports
US $ 451,613 M (2018)
Imports
US $ 468 579 M (2018)
Current account
– US $ 45,323 million (2018)
Commodity trade’s share of GDP
54 percent (2018)
Main export goods
cars and car parts, oil and gas, fish and agricultural products, machinery, metals, consumer goods
Largest trading partner
USA, China, Japan, Mexico, UK, Germany
2012
December
New federal law provokes protests among indigenous peoples
The federal law governing the conditions of Native Americans living in the reserve is changing. It will be the starting point for a new protest movement among the indigenous peoples called Idle No More. The movement also expresses dissatisfaction that the federal government and provincial governments have failed to meet previous promises that they will receive a share when exploiting natural resources. It also requires the indigenous peoples to be consulted before any exploitation can take place on their lands. Theresa Spence, chief of Attawapiskat in northern Ontario, launches a hunger strike on December 10 and says she will continue until she has been promised that concrete action will be taken. At the same time, information is leaked to the media that an independent audit has criticized Spence’s use of federal grants.
September
Canada breaks diplomatic relations with Iran
September 7
Canada breaks diplomatic relations with Iran.
Power change in Quebec
September 4th
The provincial elections in Québec lead to a shift in power, with PQ becoming the largest party with 54 of the 125 seats. However, the election success is considered to be due more to dissatisfaction with the Liberal provincial government than to any strong support for the separatist party. PQ’s electoral program requires, among other things, that mining companies pay higher royalties to the province and that it will be more difficult for foreign companies to buy companies in Québec, new language laws to preserve the French language position and that a new referendum on independence should will be held in the future. PQ leader Pauline Marois is allowed to cancel his victory, after one man has killed one person and shot another during a general election. The Liberals get 50 seats. A new party formed before the elections, the Coalition for the Future of Québec(Coalition Avenir Québec, CAQ) gets 19 seats. CAQ places more importance on ordering the province’s economy than on the demand for independence. Marois forms a minority government. The provincial government is now abolishing the fee increase for university studies and lifting the new special laws.
May
Freedom of demonstration is limited following student protests in Quebec
May 18
Student protests erupt in Québec in the spring after the Liberal provincial government decided to raise university fees by 80 percent (fees, however, are the lowest in Canada). Most of the protesters are peaceful, while smaller groups resort to militant methods. The provincial government now decides to limit the freedom of demonstration through a new law, Bill 78, adopted by the provincial parliament on May 18, but that only leads to more protests. Under the new law, no demonstrations may be held without a police clearance and permits for all demonstrations with more than 50 persons must be sought at least eight hours in advance. On May 22, over 200,000 people gathered in Montreal to protest the new law. Then more than 500 protesters have been arrested.
March
Mulcair becomes the new leader of the NDP
24th of March
The NDP appoints Thomas Mulcair, a Quebec politician, as new party leader. He thus becomes the country’s official opposition leader.
Stronger penalties are adopted in a new team package
the 12th of March
The Conservative government is presenting the first of several major legislative packages, with the prefix omnibus. By this, the penalty for a series of crimes is sharpened. Later law packages lead to a tightening of asylum legislation.
