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Economic and political overview

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 (+4.5%) and continued growing in 2022 (+3.3% - IMF) when the resources sectors helped offset slower growth in services. Private consumption (about 55% of GDP) was also one of the drivers. However, as higher borrowing costs will weigh on consumer spending while export growth diminishes in the near term amid deteriorating conditions in partner countries, the IMF expects GDP growth to moderate to 1.5% this year and 1.6% in 2024.

After skyrocketing in 2020, Canada’s debt-to-GDP ratio decreased moderately in 2021 and continued on a downward trend in 2022 (102.2% as per the IMF estimates). While the general government debt ratio is still high, after deducting the assets held by the Canada Pension Plan and the Quebec Pension Plan, the net debt ratio – at 47% of GDP - remains lower than that of other G7 countries. The IMF expects public debt to decrease in the forecast horizon, at 98.7% and 96.3% in 2023 and 2024, respectively. Similarly, the general government balance recorded a lower deficit in 2022 (-2.7% as opposed to 4% one year earlier) thanks to the withdrawal of most COVID-19 support measures, although living-cost relief related to the increase in energy prices is weighing on fiscal balances. Federal and provincial governments should scale back support as price pressures abate in 2023, reducing the fiscal deficit in 2023 (-1.2% of GDP) and 2024 (-0.6% - IMF). Meanwhile, inflation reached 6.9% in 2022, well above the upper limit of the Bank of Canada's target range (between 1 and 3%). Inflation should converge on target as underlying cost drivers ease and remaining supply bottlenecks clear, decreasing to 4.2% this year and 2.4% in 2024.

After touching record lows, the unemployment rate jumped due to the pandemic. However, the rate settled slightly above pre-pandemic levels in 2022 (5.3%), when larger-than-usual migration inflows from other countries helped to fill positions in some sectors. The IMF expects the unemployment rate to further decrease in 2023 before increasing to 6.2% the following year. Although Canadians enjoy a high per capita GDP (estimated at USD 57,827 in 2022 - IMF), 8.1% of the population lives in poverty (data 2021 Census of Population).

 
Main Indicators 202020212022 (E)2023 (E)2024 (E)
GDP (billions USD) 1,647.602,001.492,139.842,089.672,178.82
GDP (Constant Prices, Annual % Change) -5.15.03.41.51.5
GDP per Capita (USD) 43,38452,38855,08552,72254,234
General Government Balance (in % of GDP) -8.1-3.3-1.2-0.5-0.1
General Government Gross Debt (in % of GDP) 118.9115.1106.6105.1102.2
Inflation Rate (%) 0.73.46.83.92.4
Unemployment Rate (% of the Labour Force) 9.77.55.35.86.2
Current Account (billions USD) -35.48-5.38-8.32-23.60-24.20
Current Account (in % of GDP) -2.2-0.3-0.4-1.1-1.1

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 1.7% 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 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. 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. For 2022, total field crop production in Canada increased by an estimated 34% as compared to the previous year, the third highest ever (data Agriculture Canada).

The industrial sector contributes 24.6% 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. According to data from the World Bank, manufacturing accounts for 10% of the country’s GDP. While job vacancies in manufacturing declined 8.7% to 78,500 in the third quarter of 2022, they remain significantly higher than before the pandemic.

The service sector dominates the Canadian economy: it represents 66.9% 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) 1.7 24.6 66.9
Value Added (Annual % Change) -6.5 4.7 5.4

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 61% of its GDP (World Bank, latest data available). Product-wise, Canada’s main exports are petroleum products (16.3%), motor cars and other vehicles (5.8%), gold (3%), and petroleum gas (3%). The country imports mainly vehicles (8.7%), auto parts or accessories (2.9%), petroleum oils (2.7%), and telephones (2.4% - Comtrade 2021).

The main destinations for Canada’s exports in 2021 were the U.S. (by far the leading partner, accounting for 75.5% of total exports), China (4.5%), the United Kingdom (2.6%), and Japan (2.3%). Similarly, almost half of Canada’s imports had a U.S. origin (48.5%), followed by China (14%), Mexico (5.5%), Germany (3.1%) and Japan (2.5% - Comtrade).

Canada’s merchandise trade posted historical growth in 2021 as exports increased by 20.8% compared to one year earlier to reach CAD 631 billion in value, 6.6% more than the pre-pandemic record high in 2019; whereas imports rose 13% to CAD 614 billion, also a new record high (official governmental figures). Most of the growth in exports in 2021 was due to strengthened commodity prices: in real terms, Canadian exports and imports were up by 1.2% and 9.2% from 2020, respectively. Exports improved in every product sector except for motor vehicles and parts, with growth mainly driven by exports of energy, forestry, and metal and non-metallic mineral products. For imports, significant contributions from metal and non-metallic mineral products, basic and industrial chemical, plastic and rubber products, and consumer goods. Trade with the U.S. and Mexico improved consistently, also due to the USMCA (Canada-United States-Mexico Agreement, an updated version of NAFTA). Concerning services, exports totalled CAD 139.4 billion in 2021, a 4.5% increase from 2020. Meanwhile, imports amounted to CAD 145.2 billion, up by 1.7% year-on-year. After being in deficit since 2009, the World Bank estimated the country’s trade surplus at 0.1% of GDP in 2021. Lastly, it has to be noted that in recent years Canada benefited from the effects of the Comprehensive Economic and Trade Agreement (CETA) with the European Union, which entered into force provisionally (it will take full effect once all EU Member States have formally ratified it) eliminating 98% of the tariffs.

 
Foreign Trade Values 20172018201920202021
Imports of Goods (million USD) 443,169470,466463,786414,165504,017
Exports of Goods (million USD) 420,784450,743446,585390,599507,615
Imports of Services (million USD) 106,885119,605120,04390,175104,903
Exports of Services (million USD) 86,776102,243103,69884,434103,790

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

Foreign Trade Indicators 20172018201920202021
Foreign Trade (in % of GDP) 65.166.465.460.861.4
Trade Balance (million USD) -19,083-16,838-13,875-29,6653,586
Trade Balance (Including Service) (million USD) -36,238-33,733-27,407-33,7381,889
Imports of Goods and Services (Annual % Change) 4.63.40.4-10.97.7
Exports of Goods and Services (Annual % Change) 1.43.71.3-8.71.4
Imports of Goods and Services (in % of GDP) 33.634.233.531.430.6
Exports of Goods and Services (in % of GDP) 31.532.331.929.430.7

Source: World Bank ; Latest available data

Foreign Trade Forecasts 20222023 (e)2024 (e)2025 (e)2026 (e)
Volume of exports of goods and services (Annual % change) 2.63.21.72.73.4
Volume of imports of goods and services (Annual % change) 7.3-1.61.93.64.0

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)		 2022
United States 76.9%
China 3.7%
United Kingdom 2.4%
Japan 2.3%
Mexico 1.2%
See More Countries 13.5%
Main Suppliers
(% of Imports)		 2022
United States 49.2%
China 13.5%
Mexico 5.5%
Germany 3.0%
Japan 2.3%
See More Countries 26.5%

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
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

Federal elections were held in 2021, the second 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). Justin Trudeau was able to develop a minority government and went on to form the first gender-balanced cabinet in Canadian history.
Meanwhile, relations with the United States improved under the Biden administration, although concerns remain on energy and trade policies (e.g. the increase in tariffs on Canadian softwood lumber or the trade dispute over the allocation of tariff rate quotas on dairy products of Canadian origin).
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
King Charles III is the Head of State. 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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COVID-19 Country Response

Travel restrictions
Regularly updated travel information for all countries with regards to Covid-19 related entry regulations, flight bans, test and vaccines requirements is available on TravelDoc Infopage.
To find information about the current travel regulations, including health requirements, it is also advised to consult Travel Regulations Map provided and updated on a daily basis by IATA.
Import & export restrictions
A general overview of trade restrictions which were adopted by different countries during the COVID-19 pandemic is available 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 pandemic (fiscal, monetary and  macroeconomic) undertaken by the Canadian government,  please consult the section dedicated to Canada in the IMF’s Policy Tracker platform.
Support plan for businesses
For an evaluation of impact of the Covid pandemic on SMEs and an inventory of country responses to foster SME resilience, 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.
 

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