Canada: Economic and Political Overview
In this page: Economic Outline | Political Outline | COVID-19 Country Response
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 | 2020 | 2021 | 2022 (E) | 2023 (E) | 2024 (E) |
|---|---|---|---|---|---|
| GDP (billions USD) | 1,647.60 | 2,001.49 | 2,139.84 | 2,089.67 | 2,178.82 |
| GDP (Constant Prices, Annual % Change) | -5.1 | 5.0 | 3.4 | 1.5 | 1.5 |
| GDP per Capita (USD) | 43,384 | 52,388 | 55,085 | 52,722 | 54,234 |
| General Government Balance (in % of GDP) | -8.1 | -3.3 | -1.2 | -0.5 | -0.1 |
| General Government Gross Debt (in % of GDP) | 118.9 | 115.1 | 106.6 | 105.1 | 102.2 |
| Inflation Rate (%) | 0.7 | 3.4 | 6.8 | 3.9 | 2.4 |
| Unemployment Rate (% of the Labour Force) | 9.7 | 7.5 | 5.3 | 5.8 | 6.2 |
| 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, Latest data available.
Note : (E) Estimated data
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 data available.
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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.
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.
Source: The Economist Intelligence Unit - Business Environment Rankings 2020-2024
See the country risk analysis provided by Coface.
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).
- 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
The world rankings, published annually, measures violations of press freedom worldwide. It reflects the degree of freedom enjoyed by journalists, the media and digital citizens of each country and the means used by states to respect and uphold this freedom. Finally, a note and a position are assigned to each country. To compile this index, Reporters Without Borders (RWB) prepared a questionnaire incorporating the main criteria (44 in total) to assess the situation of press freedom in a given country. This questionnaire was sent to partner organisations,150 RWB correspondents, journalists, researchers, jurists and human rights activists. It includes every kind of direct attacks against journalists and digital citizens (murders, imprisonment, assault, threats, etc.) or against the media (censorship, confiscation, searches and harassment etc.).
The Indicator of Political Freedom provides an annual evaluation of the state of freedom in a country as experienced by individuals. The survey measures freedom according to two broad categories: political rights and civil liberties. The ratings process is based on a checklist of 10 political rights questions (on Electoral Process, Political Pluralism and Participation, Functioning of Government) and 15 civil liberties questions (on Freedom of Expression, Belief, Associational and Organizational Rights, Rule of Law, Personal Autonomy and Individual Rights). Scores are awarded to each of these questions on a scale of 0 to 4, where a score of 0 represents the smallest degree and 4 the greatest degree of rights or liberties present. The total score awarded to the political rights and civil liberties checklist determines the political rights and civil liberties rating. Each rating of 1 through 7, with 1 representing the highest and 7 the lowest level of freedom, corresponds to a range of total scores.
Political freedom in the world (interactive map)
Source: Freedom in the World Report, Freedom House
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