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.
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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.
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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.
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