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Economic and political overview

Economic Overview

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 and continued growing thereafter. GDP growth picked up in the first half of 2024 after a sluggish second half of 2023. Private consumption remained strong due to population growth but is weak on a per capita basis. Business investment rebounded, while housing investment continued to decline since early 2022. Overall, real GDP growth was estimated at 1.3% in 2024, supported by the normalization of monetary policy, some easing of fiscal policy, continued immigration (albeit slowing), and the expansion of the Trans Mountain pipeline. Real GDP growth is projected to strengthen in 2025 (+2% as per the IMF), driven by strong external demand supporting exports and lower policy rates fostering investment. However, private consumption growth is expected to slow due to lower population growth and a weaker labour market, before recovering in 2026. Nevertheless, on February 1, the U.S. announced 25% tariffs on all imports from Canada, except for oil, which would face a 10% tariff. The implementation was paused for a 30-day negotiation period. If the tariffs are enforced, the economic impact would be significant.

Concerning public finances, lower revenues and new spending measures have led to larger deficits in the fiscal plan, including a significant CAD 22 billion downward revision for 2023-24, bringing the deficit to CAD 61.9 billion. The 2024-25 deficit has also worsened by CAD 8.5 billion, now standing at CAD 48.3 billion (Royal Bank of Canada). The federal government has introduced several spending measures in recent budgets, prioritizing housing affordability and social spending. In November 2024, two new fiscal incentives were announced: a temporary GST/HST rebate for qualifying goods and a CAD 250 tax rebate to be issued in spring 2025. While increased government spending is only partially offset by efficiency gains and higher capital gains taxes, the overall fiscal stance is expected to remain largely unchanged in 2025-26. The debt-to-GDP ratio was estimated at 106.1% in 2024 by the IMF, with a downward trend expected over the forecast horizon (to 101.2% by 2026). According to official governmental figures, on an annual average basis, the Consumer Price Index (CPI) stood at 2.4% in 2024, down from 3.9% in 2023. Excluding energy, the CPI rose 2.6%, compared with 4.5% the previous year. The IMF projects inflation to hover around 2% this year and in 2026.

The unemployment rate rose from 5% at the start of 2023 to 6.5% in September 2024 (Bank of Canada). This increase was mainly due to more unemployed individuals struggling to find work and a growing number of new entrants to the labour force without jobs. Layoffs, however, contributed little to the rise. Although Canadians enjoy a high per capita GDP (estimated at USD 64,566 in 2024 – IMF), 9.9% of the population lives in poverty (data 2022 Census of Population).

 
Main Indicators 2023 (E)2024 (E)2025 (E)2026 (E)2027 (E)
GDP (billions USD) 2,142.472,214.802,330.312,445.952,559.32
GDP (Constant Prices, Annual % Change) 1.21.32.02.01.8
GDP per Capita (USD) 53,60753,83455,89058,26460,561
General Government Balance (in % of GDP) -0.6-1.0-0.9-1.0-0.9
General Government Gross Debt (in % of GDP) 107.5106.1103.2101.299.5
Inflation Rate (%) 3.92.41.92.02.0
Unemployment Rate (% of the Labour Force) 5.46.26.26.06.0
Current Account (billions USD) -15.54-21.16-29.36-40.40-49.95
Current Account (in % of GDP) -0.7-1.0-1.3-1.7-2.0

Source: IMF – World Economic Outlook Database , October 2021

Country Risk

See the country risk analysis provided by La Coface.

 

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Main Sectors of Industry

The agricultural sector represents 1.8% of Canada's GDP and employs only 1% of the active population (World Bank, latest data available). However, the agricultural system and the food processing industry provide 1 in 8 jobs 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 around 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. According to the latest figures from Agriculture Canada, for the 2024‑25 crop year, the production of Canada's main field crops is projected to experience a 1.8% year-over-year increase, which would be 2.4% above the previous five-year average. Farm cash receipts for Canadian farmers totalled CAD 70.6 billion for the first three quarters of 2024, down 3.0% (-CAD 2.2 billion) from the same period in 2023. Receipts for crops (-CAD 3.8 billion) and program payments (-CAD 51.2 million) fell, while receipts for livestock (CAD 1.7 billion) rose.

The industrial sector contributes 22.5% of the 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. The country is rich in gas and has the 4th largest reserves of oil in the world (being the 4th oil producer in 2024), whose production is concentrated in the western provinces, especially Alberta.  According to data from the World Bank, manufacturing accounts for around 9% of the country’s GDP. The latest data from Statistics Canada show that, in 2023, the manufacturing sector grew for the third consecutive year, with total revenue up 1.7% year over year to CAD 935.6 billion. Revenue from goods manufactured accounted for 93.4% of total revenue, rising 1.3% to CAD 874.2 billion.

The service sector dominates the Canadian economy: it represents 69.6% of the country's GDP and employs over 80% 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 was estimated to account for 1.5% of GDP at the end of Q3/2024, providing nearly 700,000 jobs. Concerning the retail sector, in 2023, retail sales increased 2.2% to CAD 794.4 billion, driven by gains at motor vehicle and parts dealers. In volume terms, sales rose 2.3%.

 
Breakdown of Economic Activity By Sector Agriculture Industry Services
Employment By Sector (in % of Total Employment) 1.3 19.2 79.5
Value Added (in % of GDP) 1.8 22.5 69.6
Value Added (Annual % Change) -4.6 -0.9 2.1

Source: World Bank - Latest available data.

 
Monetary Indicators 20162017201820192020
Canadian dollar (CAD) - Average Annual Exchange Rate For 1 USD 1.331.301.301.301.34

Source: World Bank - Latest available data.

 

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Foreign Trade

Canada is a country open to foreign trade, which represents 67% of its GDP (World Bank, latest data available). Product-wise, Canada’s main exports in 2023 were petroleum oils (20.2%), motor vehicles (6.7%), gold (3.6%), petroleum gas (2.6%), and parts of motor vehicles (2.4%); whereas imports were led by motor vehicles (10.6%) and their parts (3.6%), petroleum oils (5.7%), telephones (2.3%), and automatic data-processing machines (1.8% - data Comtrade). Energy product exports fell 19.1% in 2023 after nearly tripling from 2020 to 2022. Motor vehicle and parts exports rose 26.1% to CAD 102.0 billion.

The main destinations for Canada’s exports in 2023 were the U.S. (by far the leading partner, accounting for 77.6% of total exports), China (4%), Japan (2.1%), and the United Kingdom (1.9%). Similarly, almost half of Canada’s imports had a U.S. origin (49.6%), followed by China (11.8%), Mexico (6.1%), Germany (3.3%) and Japan (2.7% - data Comtrade). In 2023, exports to the U.S. dipped 0.4% to CAD 592.7 billion, driven by a decline in energy product exports, whose share of U.S.-bound exports fell from 34.2% in 2022 to 27.9%. Imports from the U.S. rose 2.3% to CAD 484.0 billion, led by increased motor vehicle and parts imports as supply met pent-up demand. Exports to non-U.S. countries fell 4.7% to CAD 175.6 billion, with the largest drops to the United Kingdom (-23.9%), Japan (-12.4%), and South Korea (-20.0%). Non-U.S. imports remained steady at about CAD 286 billion for the second year in a row (Statistics Canada). The tariffs introduced by the U.S. in early 2025 (25% levy on most Canadian goods) are expected to hit Canada hard by slashing export revenues in key sectors like steel, aluminium, automotive, and energy. This could lead to significant job losses, increased production costs, and higher inflation while prompting Canada to retaliate with its own tariffs that may further strain bilateral trade and force businesses to seek new markets.

In 2023, Canada’s merchandise exports fell 1.4% to CAD 768.2 billion, while imports rose 1.4% to CAD 770.2 billion. This shifted the trade balance from a CAD 19.7 billion surplus in 2022 to a CAD 1.9 billion deficit, equal to about 0.1% of total trade (CAD 1.54 trillion), resulting in a near-balanced trade position. In the same year, services exports rose 13.3% to CAD 208.5 billion, while imports grew 8.9% to CAD 205.9 billion, driven by increased international travel. This resulted in a CAD 2.6 billion services trade surplus, the first time exports exceeded imports (Statistics Canada). In 2024, Canada's total merchandise exports increased by 1.0% from 2023, while imports rose by 1.9%. As imports grew faster than exports, the merchandise trade deficit expanded from CAD 610 million in 2023 to CAD 7.2 billion (Statistics Canada preliminary figures).

 
Foreign Trade Values 20192020202120222023
Imports of Goods (million USD) 462,993420,934506,053583,549570,419
Exports of Goods (million USD) 448,817390,821507,992599,032569,257
Imports of Services (million USD) 126,638104,752120,604145,199155,598
Exports of Services (million USD) 115,24298,529118,794132,768148,580

Source: World Trade Organisation (WTO) ; Latest available data

Foreign Trade Indicators 20192020202120222023
Foreign Trade (in % of GDP) 66.261.262.467.667.2
Trade Balance (million USD) -14,168-30,2771,92815,509-1,460
Trade Balance (Including Service) (million USD) -25,538-36,4991183,078-9,809
Imports of Goods and Services (Annual % Change) -0.1-9.48.17.60.9
Exports of Goods and Services (Annual % Change) 2.3-9.02.73.25.4
Imports of Goods and Services (in % of GDP) 33.831.731.233.733.8
Exports of Goods and Services (in % of GDP) 32.429.531.233.833.4

Source: World Bank ; Latest available data

Foreign Trade Forecasts 20242025 (e)2026 (e)2027 (e)2028 (e)
Volume of exports of goods and services (Annual % change) 1.22.62.93.33.3
Volume of imports of goods and services (Annual % change) 1.23.74.04.44.3

Source: IMF, World Economic Outlook ; Latest available data

Note: (e) Estimated Data

 
International Economic Cooperation
Canada is a member of the following international economic organisations: North American Competitiveness Council (NACC), OECD, Organization of American States (OAS), Asia-Pacific Economic Cooperation (APEC), Commonwealth, G-7, G-8, G-10, G-20, among others. For the full list of economic and other international organisations in which participates Canada click here. International organisation membership of Canada is also outlined here.
Free Trade Agreements
The complete and up-to-date list of Free Trade Agreements signed by Canada can be consulted here.
 

Main Partner Countries

Main Customers
(% of Exports)		 2023
United States 77.6%
China 4.0%
Japan 2.1%
United Kingdom 1.9%
Mexico 1.1%
See More Countries 13.4%
Main Suppliers
(% of Imports)		 2023
United States 49.6%
China 11.8%
Mexico 6.1%
Germany 3.3%
Japan 2.7%
See More Countries 26.4%

Source: Comtrade, Latest Available Data

 

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Political Outline

Current Political Leaders
Governor General: Mary Simon (since 26 July 2021)
Prime Minister: Justin Trudeau (since 4 November 2015) - Liberal Party - resigned on 6 January 2025, currently on a caretaker status
King Charles III is officially the Chief of State of Canada (since 8 September 2022).
Next Election Dates
House of Commons: October 2025
Current Political Context

On January 6, 2025, Justin Trudeau declared his resignation from the post of Leader of the Liberal Party and the Prime Minister of Canada. His decision came on the heels of party dissent as well as dwindling public support. Trudeau will remain in office until the Liberal Party elects a new leader, with the leadership election scheduled for March 9, 2025. The Liberal Party is gearing up for a competition to determine who will succeed him with contenders such as former Finance Minister Chrystia Freeland and former Bank of Canada Governor Mark Carney. The Conservative Party led by Pierre Poilievre has gained traction throughout the Liberal Party's crisis and is currently considered the front-runner for the position of Prime Minister reflecting the current trend of declining influence by left-leaning parties around the world.
On the external relations front, Donald Trump's election brings considerable uncertainty to U.S.-Canada relations. Given the closer ideological distance, it can be supposed that it will be somewhat less frictional should the Conservatives come back to power; while trade issues will continue to have frictions. Furthermore, relations with China and India changed significantly. An investigation is ongoing into allegations of election interference by China, and in mid-2024, Canada imposed tariffs on EVs, steel, and aluminium, also following the U.S. Lastly, government allegations that India was behind the assassination of a Sikh leader in British Columbia, which India has denied, have dented the bilateral relationship and could jeopardise efforts to deepen diplomatic and economic ties between the two countries.
Main Political Parties
Historically, the Canadian two-party plus system has been dominated by the centre-left Liberal Party and the centre-right Conservative Party. Since the 1980s or so Canada’s dominant third-place party has been the further-left NDP. There is also a consistently fourth-place party known as the Bloc Quebecois which is devoted to Quebec separatism.

- Liberal Party of Canada (LPC): centrist party, the oldest active federal political party in Canada
- Conservative Party of Canada (CPC): centre-right to right-wing; colloquially known as the 'Tories'
- New Democratic Party (NDP): centre-left, socialist
- Bloc Québécois: centre-left, social-democratic
- Green Party of Canada (GPC): centre-left, ecologist party.

New parties are expected to run in the 2025 elections, namely the Canadian Future Party (CFP - centrist) and the Centrist Party of Canada.

Executive Power
King Charles III is the Head of State, whose role is largely cerimonial. He appoints Canada's Governor General for a five year term. The Governor General - who was a largely ceremonial role - appoints the Prime Minister as well as the Cabinet (however, cabinet members are chosen by the Prime Minister). The Prime Minister is the head of the government and holds the executive power. The leader of the majority party or coalition in the House of Commons is automatically chosen to be Prime Minister. The Prime Minister and his Cabinet stay in power as long as they have the support of the majority in the House of Commons.
Legislative Power
The legislative power in Canada is bicameral. The federal parliament made up of: the Senate (upper house), whose 105 members are appointed by the Governor General on the advice of the Prime Minister; and the House of Commons (lower house), whose 338 members are elected by universal suffrage, with each member representing a single electoral district (also known as a "riding"). The Governor General calls a general election when the Prime Minister advises him to do so. Most legislative practices are derived from the British Parliament.
 

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