Canada flag Canada: Economic and Political Overview

The economic context of Canada

Economic Indicators

For the latest updates on the key economic responses from governments to address the economic impact of the COVID-19 pandemic, please consult the IMF's policy tracking platform Policy Responses to COVID-19.

Following the unprecedented global crisis prompted by the spread of the COVID-19 pandemic - which led to the largest economic contraction since 1945 - the Canadian economy rebounded in 2021, recording an estimated GDP growth of 5.7%. Rising global oil prices helped the recovery, together with the easing of containment measures that supported internal demand. The IMF expects the country to grow faster than the pre-pandemic trend, with a forecasted growth of 4.9% this year and 2.6% in 2023, although uncertainty remains at global level due especially to the insurgence of the Omicron variant of the virus.

After skyrocketing in 2020, Canada’s debt-to-GDP ratio decreased moderately to 109.9% in 2021 despite the fact that the government increased its borrowing in order to make the necessary temporary investments to stabilize the national economy amidst the extraordinary circumstances of the COVID-19 pandemic. The IMF expects the debt to follow a downward trend in 2022 (103.9%) and 2023 (100.2%). Similarly, the general government balance recorded a deficit of 6.6% in 2021, although further withdrawal of pandemic support measures should contribute to a reduction of the deficit (projected at 2.7% this year and 1% in 2023). In the 20 years before the pandemic, goods inflation averaged only 1.4%. However, according to the latest figures by the Bank of Canada, supply constraints have led to higher inflation: the average inflation rate of goods in 2021 has been 4.4%, much higher than that of services, which has been 2.1%. Inflation should ease as energy price pressures abate and supply bottlenecks are resolved through 2022, with an IMF forecast of 2.6% (followed by 2% the year after).

After touching record lows, the unemployment rate jumped due to the pandemic. In 2021, the unemployment rate remained elevated (7.7%) and over a quarter of those unemployed have been out of work for half a year or more (up from 16% before the pandemic). Strong output growth will support increased labour demand and help pull unemployment down towards pre-pandemic levels: the IMF projects a gradual decrease, at 5.7% this year and 4.9% in 2023. Although Canadians enjoy a high per capita GDP (estimated at USD 51,713 in 2021), 1 in 7 (or 4.9 million) people in Canada live in poverty.

 
Main Indicators 201920202021 (e)2022 (e)2023 (e)
GDP (billions USD) 1,741.581,644.042,015.982,189.792,306.07
GDP (Constant Prices, Annual % Change) 1.9-5.3e4.74.12.8
GDP per Capita (USD) 46,400e43,29552,79156,74059,126
General Government Balance (in % of GDP) 0.3-8.1-6.6-2.7-1.0
General Government Gross Debt (in % of GDP) 86.8117.5e109.9103.9100.2
Inflation Rate (%) 1.90.73.45.62.4
Unemployment Rate (% of the Labour Force) 5.79.6e7.75.74.9
Current Account (billions USD) -35.71-29.8910.564.63-17.62
Current Account (in % of GDP) -2.1-1.80.50.2-0.8

Source: IMF – World Economic Outlook Database, October 2021

Note: (e) Estimated Data

Main Sectors of Industry

The agricultural sector represents 1.9% of Canada's GDP and employs only 2% of the population (World Bank, latest data available). However, the agricultural system and the food processing industry provide 1 in 8 jobs in Canada and account for over CAD 100 billion of the country’s GDP and more than CAD 60 billion in exports. Canada is one of the largest exporters of agricultural products in the world - particularly of wheat - and produces 10% of the world's GMO harvests. Fishing is another important sector. Canada is also one of the leading producers of minerals, especially nickel, zinc and uranium. Moreover, the country is rich in gas and has the 4th largest reserves of oil in the world (being the 7th oil producer), whose production is concentrated in the western provinces, especially Alberta.

The industrial sector contributes 24% of GDP and employs 19% of the labour force. Canada has six strong primary industry sectors: renewable energies (mainly wind, the country is a net exporter of energy); the forestry sector, hydrogen and fuel cells, mines, metals and minerals, fishing, oil and gas. According to data from the World Bank, manufacturing accounts for 10% of the country’s GDP.

The service sector dominates the Canadian economy: it represents 67.1% of the country's GDP and employs over 79% of the active population (the largest employer being the retail sector - which employs about 12% of the country’s workforce alone - and the business-related services sector). The education and health sectors are also pivotal for the country’s economy. The most dynamic sectors in recent years have been telecommunications, tourism, internet and aerospace engineering. Tourism is the fifth-largest sector in the country’s economy, it provides 1 in 10 jobs and is responsible for 225,000 small and medium-sized businesses across Canada.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 1.5 19.3 79.2
Value Added (in % of GDP) 1.9 24.0 67.1
Value Added (Annual % Change) 5.7 -6.8 -5.0

Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.

 

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Indicator of Economic Freedom

Definition:

The Economic freedom index measure ten components of economic freedom, grouped into four broad categories or pillars of economic freedom: Rule of Law (property rights, freedom from corruption); Limited Government (fiscal freedom, government spending); Regulatory Efficiency (business freedom, labour freedom, monetary freedom); and Open Markets (trade freedom, investment freedom, financial freedom). Each of the freedoms within these four broad categories is individually scored on a scale of 0 to 100. A country’s overall economic freedom score is a simple average of its scores on the 10 individual freedoms.}}

Score:
77,8666666666667/100
World Rank:
9
Regional Rank:
1

Economic freedom in the world (interactive map)
Source: Index of Economic Freedom, Heritage Foundation

 

Business environment ranking

Definition:

The business rankings model measures the quality or attractiveness of the business environment in the 82 countries covered by The Economist Intelligence Unit’s Country Forecast reports. It examines ten separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.

Score:
8.42/10
World Rank:
3/82

Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024

 

Country Risk

See the country risk analysis provided by Coface.
 

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Sources of General Economic Information

Ministries
Treasury Board of Canada Secretariat
Department of Finance Canada
Global Affairs Canada
Innovation, Science and Economic Development Canada
Agriculture and Agri-Food Canada (AAC)
Statistical Office
Statistics Canada
Central Bank
Bank of Canada
Stock Exchange
Montreal Stock Exchange
Canadian Stock Market Research
TSX Group - Toronto Stock Exchange
Economic Portals
Financial Post
Aboriginal Business Directory
 

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Latest Update: June 2022