Canada is the 9th largest economy in the world based on GDP (current prices, US dollars) and the 14th largest based on GDP (PPP). Since the 2008 global financial crisis, the Canadian economy has re-emerged as one of the strongest advanced economies in the world. In 2010, Canada’s GDP growth (constant prices, national currency) stood at 3.071 percent – the highest it had been since 2004.
Prior to World War II, agriculture was the primary driver of the Canadian economy with over 60 percent of the population living in rural towns or farms. Canada had struggled to recover from the Great Depression, with Gross National Product falling by 43 percent and exports dropping by 50 percent between 1929 and 1933. By 1933, unemployment had risen to more than 25%.
World War II marked a major transformation in the Canadian economy. Manufacturing, mining and services grew rapidly to meet the demands of the war and agriculture production became more mechanised and efficient.
As a result, there was an upturn in industrial production and manufacturing in Canada. New jobs were also being created while industries benefitted from a highly trained and diversified labour force that had arisen during the war.
Today, the Canadian economy strongly resembles that of its neighbour to the south, the US. Besides having similar patterns of production and living standards, Canada has also adopted a market oriented economic system.
However unlike the US or most other advanced economies, Canada’s primary sector, namely the logging and oil industries, remains an important element to the economy. Canada’s manufacturing industry is also highly valued by the economy – the automobile industry for example attracts major investments from US and Japanese automobile companies with multiple manufacturing plants set up in Canada.
Canada’s economy also distinguishes itself from the US, whereby it is a net exporter of commodities while the US is a net importer. Furthermore, the Canadian banking industry is considered to be fairly conservative compared to that of the US.
Despite the differences, Canada’s economic progress is closely tied to that of the US. Following the signing of the 1989 US-Canada Free Trade Agreement (FTA) and the 1994 North American Free Trade Agreement (NAFTA), trade and economic integration between both countries have increased significantly. The US is Canada’s largest foreign investor with heavy investments in mining, smelting, petroleum, chemicals and machinery. Often, Canadian economic policies have been adjusted in order to adapt to changes in the US economy. Historically, even a minor change in the US interest rates has had economic repercussions in Canada.
Canada’s Export, Import and Trade
Although NAFTA dramatically improved trade between the US and Canada, disputes still remain pertaing to intellectual property rights, softwood lumber, beef, tomatoes and other agricultural products.
The US is Canada’s largest and most important trade partner. In 2009, 75.02 percent of Canadian exports were directed to the US, while 51.1 percent of imports came from the US.
Commodities dominate trade between the US and Canada. In agriculture, both countries are its counterpart’s largest export market – the US imports more than half of Canada’s food products while Canada imports nearly 20 percent of the US’s food product.
The energy trade is another critical element in US-Canada trade. Canada is the US’s largest oil supplier, accounting for 16 percent of US oil imports and 14 percent of US’s natural gas consumption. Besides sharing hydropower facilities on the western borders, national electricity grids in Canada and the US are also linked with each other.
The UK and China are Canada’s next largest export partners after the US. Respectively, these countries account for 3.37 and 3.09 percent of Canada’s exports. China is also the second largest source for imports to Canada, accounting for 10.88 percent of imports. In 2010, Canada was the 10th largest exporter and 12th largest importer in the world.
The Canadian Economy in Brief
Canada’s Economic Structure
Historically, much of Canada’s exports have been derived from its natural resources. Canada contains a rich abundance of mineral, forest and water-based resources such as iron ore, nickel, zinc, copper, gold, lead, rare earth elements, molybdenum, potash, diamonds, silver, fish, timber, wildlife, coal, petroleum, natural gas and hydropower.
Although fishing and forestry were once major Canadian industries, mineral and energy resources have become the leading source of income for the nation. Canada is the world leader in value of mineral exports with energy resources providing for a vast amount of profit. Canada is a net exporter of energy, exporting 2.151 million barrels of oil per day and 94.67 billion cubic metres of natural gas in 2010. As a result, Canada is the 10th largest exporter of oil and the 3rd largest exporter of natural gas in the world. In addition, Canada has the 2nd largest proven reserves of oil in the world together with the 21st largest proven reserves of natural gas.
Although energy and mineral resources have greatly strengthen the Canadian economy, the emergence of these industries has led to an economic imbalance within Canada. In recent years, Western Canada has seen rapid economic growth with its abundance of oil. Central Canada on the other hand, contains much of its services and manufacturing industries. However, the four Atlantic Provinces of Canada, New Brunswick, Prince Edward Island, Nova Scotia and Newfoundland and Labrador have seen a major decline in its economic activity since the 19th century as its primary focus is in the fishing industry. As such, these regions have begun to diversify their economy with Newfoundland and Labrador leading the way in new oil and gas exploration.
Canada is the second largest country in the world in terms of land area – behind Russia and ahead of the US. In 2010, its population was 34.059 million with a labour force of 18.59 million.
Despite having the 9th largest labour force participation rate in the world, Canada faces an aging labour force. Between 1991 and 2001, the average age of the Canadian labour force grew from 37.1 to 39 years old.
Immigration has been seen as a solution to its labour force problems. According to Candian census data, migrants to Canada during the 1990s are now responsible for nearly 70 percent of labour force growth.
In 2010, 15.9 percent of Canada’s population was above the age of sixty five, 68.5 percent were between the ages of fifteen and sixty four while 15.7 percents were aged fourteen and below. Canada also has an extremely low population growth rate of 0.794 percent.
The Canadian labour force is split among numerous industries. According to the latest available data from 2006, 2 percent worked in agriculture, 13 percent in manufacturing, 6 percent in construction, 76 percent in services and a further 3 percent in other industries.
Canada’s Industry Sectors
As for its economy, agriculture was responsible for 2 percent of Canada’s GDP in 2010, with industry accounting for 20 percent and services completing the pie at 78 percent.
Despite contributing to only 2 percent of Canada’ GDP, Canadian agricultural products are among the most widely sought of in the world. Canada is one of the world's largest suppliers of agricultural products – they lead the world in lentils, linseed, mustard seed and peas and among the top ten producers of barley, blueberries, cranberries, mixed grain, oats, rapeseed, pork, wheat, turkey, raspberries, rye, soybeans, beef, mushrooms, chick-peas and maize.
Canada’s agriculture industry benefit from government subsidies and supports. However, the country is also an advocate of reducing market subsidies from the WTO. In 2000, Canada used only US$848.2 million of its US$4.3 billion subsidy allowance granted by the WTO.
After the 2008 financial crisis, Canada’s record a negative industrial production growth rate in 2009 – after a long period of positive growth. The industrial prodution growth rate, which measures the annual percentage increase in the country’s manufacturing, mining and construction, recovered in 2010 – growing by 5.8 percent.
In 2010, the list of key Canadian industries includes transportation equipment, chemicals, processed and unprocessed minerals, food products, wood and paper products, fish products, petroleum and natural gas.
Canadian services such as retail, business, education and health are also amongst the strongest in the world, having benefited from modern technology and processes. Canada's major banks for example did not suffer as badly as those in the US during the global financial crisis – thanks to the financial industry’s tradition of conservative lending practices and strong capitalization. Canada’s finance and banking industries are amongst the fastest growing in the world with potential for further growth.
Canada’s Economic Forecast
In 2011, The Canadian economy is expected to see modest growth on the back of similar growth patterns in the second half of 2010. According to the Canadian Chamber of Commerce, “economic activity in 2011 will be tempered as federal and provincial governments curtail fiscal stimulus and then step up their efforts to restrain spending.” Much of Canada’s economic growth will also rely on domestic demand as well as demand from the US.
In 2010, Canada’s GDP (PPP) was US$1.330 trillion. Significantly, this was 4.05 percent higher than it was in 2009. From 2011 to 2016, Canada’s GDP (PPP) is expected to increase annually by 3.66 to 4.04 percent before reaching US$1.665 trillion. This will make Canada the 13th largest economy in the world according to GDP (PPP).
Similarly, Canada’s GDP (PPP) per capita is also expected to grow by a slow but consistent rate from 2011 to 2016. In 2009, Canada’s GDP (PPP) per capita fell by 2.75 percent to US$37,970.90. The subsequent recovery in 2010 followed by annual growth of anywhere between 2.20 to 2.71 percent will see Canada’s GDP (PPP) per capita hit US$45,108.04 by the end of 2016.
Despite strong economic growth in the first half of 2010, job creation slowed in the second half of the year. As a result, unemployment rates still remain relatively high. In 2010, the unemployment rate in Canada was 7.992 percent. Although this was an improvement from 2009’s unemployment rate of 8.292 percent, it is still considerably higher than pre-financial crisis levels. Canada’s unemployment rate is expected to gradually improve and return to pre-financial crisis levels by 2015. From 2015 to 2016, the unemployment rate is expected to remain consistent at 6.1 percent.
Since 1992, Canada’s inflation rate has never gone above 2.75 percent. Apart from abnormalities in 1994, 1998 and 2009, where inflation dropped below 1 percent, the inflation rate in Canada has remained fairly consistent and well anchored within the Bank of Canada’s operational target of 1 to 3 percent. According to the Canadian Chamber of Commerce, a strong currency, relatively high unemployment, modest salary gains and a significant output gap will continue to help withstand any inflation pressures in the future.
In 2011, Canada’s inflation rate (average consumer price change) is expected to be at 2.231 percent. From 2012 to 2016, the inflation rate is expected to hover between 1.9 percent and 2.03 percent.
From 1999 to 2008, Canada possessed a current account balance surplus. However, in the advent of the financial crisis, Canada now has the 7th largest current account balance deficit in the world behind the US, Spain, Italy, France, Brazil and the UK. In 2008, Canada’s current account balance stood at US$6.483 billion. However, by the end of 2009 this figure changed to become negative US$38.075 billion. In 2010, the deficit increased further to negative US$48.515 billion. Canada’s current account balance deficit is expected to increase marginally to negative US$49.056 billion by the end of 2011, before gradually decreasing in the next few years. By the end of 2016, Canada’s current account balance deficit will fall to negative US$26.871 billion.
Note from : EconomyWatch.com
-------------------------------------------------------------
-------------------------------------------------------------
0 Comments
Post a Comment
Comment about this article or ask questions