Businesses in Canada & the Potential of our Economy
As Canada turns 152 this year, we thought it would be fitting to highlight some of the greatest things about Canada. Here are a few quick facts about the great white north:
1. Did you know that Canada has the longest coastline of any other country in the world?
2. Not only that but 31% of the land is covered in forestry. (10% of the world’s forests!)
3. 77% of the world’s maple syrup is produced in Quebec, Canada.
4. Canada’s national parks are actually bigger than most countries.
5. The Toronto Raptor’s 2019 Championship win certainly was a momentous time in Canadian sports history, but did you know that the sport was actually invented by a Canadian?
Another interesting fact about Canada from a business perspective, is that it ranks 12th on the 2018-19 global competitiveness rankings provided by the GCR, via the World Economic Forum. This number is based on the well-developed and diversified economy with the 10th largest GDP by nominal and 16th by PPP.
It comes as no surprise that the backbone of Canada’s economy is natural resources. Thanks to its enormous coastline (fishing) and the forest land (wood logging), these industries, as well as mining, energy and agriculture make up for about 55% of Canada’s total exports. The remainder of Canada’s exports mostly include machinery, equipment, automotive products and other manufactured goods, making Canada’s total exports almost as diverse as the country itself.
Despite the economic slowdown in 2015 and 2016, it was shortly followed by a broad-based economic growth in 2017 and 2018 that created jobs and brought the national unemployment rate down to a four-decade low. Although decrease in unemployment rates might suggest economic growth through consumer spending and real estate activity, this is unfortunately not the case. The average Canadian household debt has risen and economic growth has slowed. In the fourth quarter of last year, the Canadian economy slowed and negligible annualized growth was weak with an increase of 0.4%. This means that exports and investment need to become bigger contributors to economic growth.
Currently, exports make up approximately ⅓ of the total value of the economy. The U.S. is by far the nation’s biggest trading partner, with 70% of exports and 60% of imports being exchanged with our neighbor to the south. Meanwhile, Asian importers purchased about 12% of exports, while buyers in Europe consumed about 8.5%.
Although the U.S. recently rescinded a crippling 25% tax on Canadian steel and 10% tax on aluminum, it still significantly impacted Canadian manufacturers including BMP Metals Inc. and its competitors. That being said, relying heavily on one trading partner can be risky, and while the American protectionist attitude under the Trump administration continues, souring relations with our preferred trade partner continues to put the Canadian economy in danger.
In these times of uncertainty, our nation must pursue the drivers of productivity to increase the country’s competitiveness. The federal government only spends about 1.6% of its GDP on research and development (0.4% below average among member countries in the OEDC), and Canadian businesses struggle to compete with U.S. firms that have benefited from tax reform. On the bright side, there is a great deal of potential that remains untapped for Canada. Increase in technological development, improvements on openness and government aid will all determine whether or not Canada finds itself in one of the top ten spots next year.
The future can be bright for Canada’s economy, but in the meantime, crack those cool drinks open, enjoy the fireworks, and let’s celebrate Canada Day 2019. Happy Birthday Canada!