Canada flag Canada: Economic outline

Economic Outline

Economic Indicators

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 (+4.5%) and continued growing in 2022 (+3.4% - IMF). Nevertheless, economic activity slowed in 2023: after a robust performance in the first quarter (with real GDP expanding by 0.6%), output growth came to a standstill in the second quarter, showing virtually no growth. For the year as a whole, the IMF estimated growth at 1.3%. Despite rising crude oil prices, Canadian commodity export prices were still below the mid-2022 peaks. The terms-of-trade decline created a negative income shock, contributing to subdued demand. Furthermore, dry weather conditions lead to a reduction in yields for key farm outputs, particularly wheat. Real GDP growth is expected to increase marginally to 1.6% in 2024, reflecting a deceleration in domestic demand amid elevated borrowing costs and declining exports, before picking up to 1.9% in 2025 benefiting from improved global conditions that bolster export performance.


The fiscal policy continues to be restrictive, reducing the burden of gross general government public debt, currently hovering around 106.4% of GDP (IMF). Anticipated decreases in nominal GDP and business profits are expected to contribute to a continued decline in revenue growth. Measures at the federal and provincial levels to alleviate household living cost pressures have appropriately scaled back: the overall government budget deficit decreased to 0.8% in 2023, from 1.4% one year earlier (IMF), and is anticipated to hover around 0.5% over the forecast horizon. The debt-to-GDP ratio should also follow a downward trend in 2024 (103.3%) and 2025 (100.6%). The federal government is actively implementing structural reforms outlined in its annual budget. These reforms encompass backing the green transition, expanding affordable childcare, addressing the rising costs related to an ageing population, and implementing measures to reduce housing expenses. The current monetary policy remains contractionary, curbing demand and aiding in re-establishing inflation expectations. The policy rate is expected to stay elevated at 5% until mid-2024 to ensure a return of price growth within the Bank of Canada's target range of 1% to 3%. However, adjustments to the rate may be necessary in response to evolving macroeconomic conditions to mitigate inflationary pressures. The overall inflation rate was estimated at 3.6% in 2023 by the IMF, with an expected decrease to 2.4% and 1.9% this year and the next, respectively.

Continued labour market slack is expected to result in further upticks in the unemployment rate (5.5% in 2023) until mid-2024 (with a 6.4% rate expected for the year as a whole - IMF). Wage growth will moderate, staying approximately in sync with consumer-price inflation, which is anticipated to reach the target by the third quarter of the following year. Although Canadians enjoy a high per capita GDP (estimated at USD 59,813 in 2023 - IMF), 8.1% of the population lives in poverty (data 2021 Census of Population).

 
Main Indicators 20222023 (E)2024 (E)2025 (E)2026 (E)
GDP (billions USD) 2,137.942,117.812,238.572,364.552,474.33
GDP (Constant Prices, Annual % Change) 3.41.31.62.41.8
GDP per Capita (USD) 55,03753,24755,52857,89959,838
General Government Balance (in % of GDP) -1.4-0.8-0.4-0.5-0.5
General Government Gross Debt (in % of GDP) 107.4106.4103.3100.698.6
Inflation Rate (%) n/a3.62.41.91.9
Unemployment Rate (% of the Labour Force) 5.35.56.36.06.0
Current Account (billions USD) -7.00-20.94-21.39-28.72-35.02
Current Account (in % of GDP) -0.3-1.0-1.0-1.2-1.4

Source: IMF – World Economic Outlook Database, 2016

Note: (e) Estimated Data

 
Monetary Indicators 20162017201820192020
Canadian dollar (CAD) - Average Annual Exchange Rate For 1 GHS 0.330.300.280.250.24

Source: World Bank, 2015

 

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Latest Update: February 2024