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Economic Overview

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 (%) 1.90.73.22.62.0
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

Country Risk

See the country risk analysis provided by La Coface.

 

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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.

 
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 60% of its GDP (World Bank, 2020). Product-wise, Canada’s main exports are petroleum products (12.3%), motor cars and other vehicles (8.2%), gold (4.1%), and auto parts (2.3%). The country imports mainly vehicles (8.4%), auto parts or accessories (3.6%), automatic data processing machines and telephones (2.4% each - Comtrade).

The main destinations for Canada’s exports in 2020 were the U.S. (by far the leading partner, accounting for 73.3% of total exports), China (4.8%), the United Kingdom (3.8%), and Japan (2.4%). Similarly, almost half of Canada’s imports had a U.S. origin (48.8%), followed by China (14.1%), Mexico (5.5%), Germany (3.2%) and Japan (2.5% - Comtrade).

Canadian trade was weak in 2020: according to data by WTO, exports of goods amounted to USD 390.6 billion, down by 12.5% from the previous year. Imports – at USD 414.1 billion - followed a similar trend (-10.7%). Concerning commercial services, Canada is also a net importer, with imports standing at USD 90.1 billion versus USD 84.4 billion in exports. The country’s trade deficit widened in recent years, attributable to exports in goods lagging imports in goods, partly due to the low prices of hydrocarbons and to the trade tensions with its main business partner, the USA. Meanwhile, the Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union entered into force provisionally (it will take full effect once all EU Member States have formally ratified it) eliminating 98% of the tariffs, whereas the USMCA (Canada-United States-Mexico Agreement, an updated version of NAFTA) entered into force and is expected to further boost trade among the participating countries. The World Bank estimated the country’s trade deficit at 2% of GDP in 2020. According to the latest governmental figures, Canadian exports advanced 18.7% in the first half of 2021 (y-o-y), as higher exports of resource products were partially offset by lower exports of motor vehicles and parts and aircraft and other transportation equipment. Commercial services is the only component of services trade that is now well above pre-pandemic levels, whereas transportation and travel have not yet begun their recovery. In the same period, total services exports were 19.3% below the pre-pandemic level in Q4 2019, and total services imports were 30.6% lower.

 
Foreign Trade Values 20162017201820192020
Imports of Goods (million USD) 416,602443,169470,466463,786414,165
Exports of Goods (million USD) 390,117420,784450,743446,585390,599
Imports of Services (million USD) 97,378106,885119,605120,04390,175
Exports of Services (million USD) 80,92786,776102,243103,69884,434

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

Foreign Trade Indicators 20162017201820192020
Foreign Trade (in % of GDP) 65.465.166.665.460.0
Trade Balance (million USD) -19,170-19,083-15,327-11,576-27,321
Trade Balance (Including Service) (million USD) -36,242-36,238-32,664-27,771-32,976
Imports of Goods and Services (Annual % Change) 0.14.63.40.4-11.2
Exports of Goods and Services (Annual % Change) 1.41.43.71.3-10.0
Imports of Goods and Services (in % of GDP) 33.933.634.233.531.0
Exports of Goods and Services (in % of GDP) 31.531.532.331.929.0

Source: World Bank ; Latest available data

Foreign Trade Forecasts 20212022 (e)2023 (e)2024 (e)2025 (e)
Volume of exports of goods and services (Annual % change) 5.08.41.12.51.9
Volume of imports of goods and services (Annual % change) 12.710.31.13.22.1

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)
2020
United States 73.3%
China 4.8%
United Kingdom 3.8%
Japan 2.4%
Mexico 1.2%
See More Countries 14.5%
Main Suppliers
(% of Imports)
2020
United States 48.8%
China 14.1%
Mexico 5.5%
Germany 3.2%
Japan 2.5%
See More Countries 25.9%

Source: Comtrade, Latest Available Data

 

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Political Outline

Current Political Leaders
Governor General: Mary Simon (since 6 July 2021)
Prime Minister: Justin Trudeau (since 4 November 2015) – Liberal Party

Queen Elizabeth II is officially the Chief of State of Canada.
Next Election Dates
House of Commons: 2025
Current Political Context

Federal elections were held in 2021, the second elections in two years. The Liberal Party of incumbent Prime Ministry Justin Trudeau maintained their status as the largest party in the House of Commons obtaining 32.6% of the votes and 160 seats, followed by the Conservative party (119 seats), the Bloc Québécois (32 seats) and the New Democratic Party (25 seats).
Despite the fact the Liberals failed to secure a majority of seats, Justin Trudeau was able to form a minority government and went on to form the first gender-balanced cabinet in Canadian history.

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

Executive Power
Queen Elizabeth II is the Head of State. She 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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COVID-19 Country Response

COVID-19 epidemic evolution
To find out about the latest status of the COVID-19 pandemic evolution and the most up-to-date statistics on the COVID-19 disease in Canada, please visit the official governmental portal and the Covid-19 Situational Awareness Dashboard with the official data.
For the international outlook you can consult the latest situation reports published by the World Health Organisation as well as the global daily statistics on the coronavirus pandemic evolution including data on confirmed cases and deaths by country.
Sanitary measures
To find out about the latest nationwide public health situation, please consult the Canadian government platform Coronavirus disease (COVID-19): prevention and risks. Each province has its own measures and laws. Links to each of the provinces’ COVID-19 webpages are available at Canada.ca - Provincial and territorial resources for COVID-19.
Travel restrictions
The COVID-19 situation, including the spread of new variants, evolves rapidly and differs from country to country. All travelers need to pay close attention to the conditions at their destination before traveling. Regularly updated information for all countries with regards to Covid-19 related travel restrictions in place including entry regulations, flight bans, test requirements and quarantine is available on TravelDoc Infopage.
It is also highly recommended to consult COVID-19 Travel Regulations Map provided and updated on the daily basis by IATA.
The US government website of Centers of Disease Control and Prevention provides COVID-19 Travel Recommendations by Destination.
The UK Foreign travel advice also provides travelling abroad advice for all countries, including the latest information on coronavirus, safety and security, entry requirements and travel warnings.
Import & export restrictions
For information on all the measures applicable to movement of goods during the period of sanitary emergency due to the COVID-19 outbreak (including eventual restrictions on imports and exports, if applicable), please consult the Trade Commissioner’s website COVID-19 and Canada’s international trade.
For a general overview of trade restrictions due to COVID-19 pandemic, please consult the section dedicated to Canada on the International Trade Centre's COVID-19 Temporary Trade Measures webpage.
Economic recovery plan
For information on the economic recovery scheme put in place by the Canadian government to address the impact of the COVID-19 pandemic on the Canadian economy, please visit the Canadian government’s webpage Canada’s COVID-19 Economic Response Plan.
For a general overview of the key economic policy responses to the COVID-19 outbreak (fiscal, monetary and  macroeconomic) taken by the Canadian government to limit the socio-economic impact of the COVID-19 pandemic,  please consult the section dedicated to Canada in the IMF’s Policy Tracker platform.
Support plan for businesses
For information on the local business support scheme established by the Canadian government to help small and medium-sized companies to deal with the economic impacts of the COVID-19 epidemic on their activity, please consult the "support for businesses" section on the Canada.ca website.
For a general overview of international SME support responses to the COVID-19 outbreak refer to the OECD's SME Covid-19 Policy Responses document.
You can also consult the World Bank's Map of SME-Support Measures in Response to COVID-19.
Support plan for exporters
To find out about the support plan for the Canadian exporting companies put in place by the Canadian government, please consult the dedicated page on the Trade Commissioner’s website.
 

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