Canada: Macroeconomic Country Outlook
- GlobalData forecasts Canada’s real GDP to grow by 4% in 2022
- Canada was ranked 14th out of 152 nations in the GlobalData Country Risk Index (GCRI) Q2 2022
- According to GlobalData, the country’s wholesale, retail and hotel sector grew at a CAGR of 4.4% during 2017–21
According to the Heritage Foundation, Index of Economic Freedom (2022), Canada was ranked as the 15th freest economy among 184 nations, with a score of 76.6 out of 100. The country was ranked first among 32 other nations in the Americas region and the overall score was above the regional as well as the world averages. Canada ranked high on indicators, including property rights, judicial effectiveness, and monetary freedom.
Key findings
- Canada aims to strengthen its semiconductor industry: Under Canada’s Budget 2022, the federal Government of Canada announced an allocation of CAD150 million ($119.6 million) to support investments towards development and supply of semiconductors. The government aims to modernize the National Research Council’s Canadian Photonics Fabrication Centre, which supplies photonics research, testing, prototyping, and pilot-scale manufacturing services to academics and businesses in Canada. Moreover, the government proposes to allocate CAD45 million ($35.9 million) over a period of four years, beginning 2022–23, towards Innovation, Science, and Economic Development Canada with an aim to engage with stakeholders, conduct market analysis and support, and support projects that will help in strengthening Canada’s semiconductor industry.
- Canada and India to increase cooperation: In June 2022, Canada and India signed a memorandum of understanding (MoU) to increase bilateral cooperation in climate action, environmental protection, and conservation. Under the agreement, both nations aim to cooperate and exchange information in areas, including renewable energy capacity, decarbonising heavy industries, reducing plastic pollution, and ensuring sustainable consumption. In addition, both the countries aim to support each other’s climate and environmental goals by finding effective and long-term solutions, which will help in creating opportunities to advance economic growth and job creation.
- World Bank’s Doing Business ranking in 2020: According to the World Bank, Ease of Doing Business Report (2020), Canada was ranked 23rd out of 190 countries. In order to start a business in Canada, it takes two procedures and 1.5 days, compared to the OECD high income average of 4.9 procedures and 9.2 days. Canada was ranked seventh in terms of protecting minority investors and third in starting a business. Measures such as an e-system for enforcing contracts and better leave policy for employees have boosted the country’s score.
- Reducing taxes for small businesses in Canada: Currently small businesses in Canada benefit from a reduced tax rate of 9% on their first CAD500,000 ($396,350) of their taxable income as compared to the general federal corporate tax rate of 15%. However, small businesses have no access to this low tax rate once its level of capital employed reaches CAD15 million ($11.9 million). In the Budget 2022, the government aims to phase out the small business tax more gradually with the tax rate, to be fully phased out when the taxable capital would reach CAD50 million ($39.6 million) rather than CAD15 million ($11.9 million). This initiative will aid businesses to save an estimated CAD660 million ($523.2 million) in tax savings over 2022–23 to 2026–27.
- The country performs well across indicators related to the rule of law index: According to the World Justice Project, Rule of Law Index (2021), Canada ranked 12th out of 139 economies on the rule of law parameter. The nation ranked 11th out of 139 economies on the criminal justice indicator. On the fundamental rights parameter, the nation ranked 13th out of 139 economies. On the regulatory enforcement parameter, which measures the extent to which regulations are effectively implemented and enforced, Canada ranked 15th out of 139 countries. Lastly, on constraints of government power indicator, where the index measures the extent by which the powers of the government and its officials and agents are limited and held accountable under the law, Canada ranked 13th out of 139 nations.
- Various environmental initiatives under budget 2022: Under Budget 2022, the government has proposed various environmental initiatives which include, i) An investment of CAD1.7 billion ($1.3 billion) to extend initiatives for the Zero-Emission Vehicles program until March 2025, ii) Investing CAD250 million ($198.2 million) over four years for Natural Resources Canada, to support pre-development activities of clean electricity projects that are of national significance, iii) Invest CAD25 million ($19.8 million) to establish Regional Strategic Initiatives developing net-zero energy plans, iv) Investment of CAD547.5 million ($434.0 million) over four years for launching a new purchase incentive program for medium and heavy duty zero-emission vehicles to help businesses upgrade their fleets.
Key fundamentals
Sectoral outlook
- Tourism industry expected to witness slow recovery in 2022: Canada’s tourism industry is a major component of the economy and contributes significantly to job growth. According to the World Travel and Tourism Council, tourism contributed 10.3% towards GDP in 2019. However, this contribution decreased to 5.3% in 2020 and increased slightly to 6.1% in 2021. However, in February 2022, Canada opened its borders for international tourists. According to Statistics Canada, tourism spending amounted to CAD15.6 billion ($12.4 billion) in Q1 2022, an increase of 1.3%, compared to the previous quarter. In addition, the country welcomed 846,700 international tourists in June 2022, nearing levels recorded in the same month of 2019. According to GlobalData, international tourists' arrivals are forecast to increase at a CAGR of 15% during 2022–25.
- Positive outlook for steel manufacturing: Removal of US tariffs on steel exports from Canada since May 2019 supported steel exports. In 2019, the government has been investing in the steel sector in order to boost the country’s steel production. In 2019, the government invested CAD18 million ($13.7 million) at Heico facilities in Marieville, Quebec, L’Orignal, Ontario, and Ingersoll, Ontario, which is expected to support thousands of jobs. Onset of the COVID-19 pandemic restircted production activity in many plants during 2020. However, in February 2022, representatives from the Government of Ontario and ArcelorMittal Dofasco, announced an investment of CAD500 million ($396 million) towards boosting manufacturing and reducing greenhouse gases in the country’s steelmaking industry. The investment follows a CAD400 million ($317 million) by the federal government in July 2021. With investments the government aims the auto sector to build electric, low-carbon, connected and autonomous vehicles. In addition, the government also aims to attract more investment towards the steel sector, create additional jobs and achieve the reduction target in greenhouse gases by 2030.
- Canadian government’s investment in renewable energy expected to boost production: In June 2021, the Government of Canada launched a CAD964 million ($764.2 million) program to support smart renewable energy and grid modernization projects. The project will aim to lower emissions by investing in the wind, solar, storage, hydro, geothermal, and tidal projects. In addition, according to the budget 2022, the Canadian government aims to invest CAD600 million ($475.6 million) over a period of seven years, towards Natural Resources Canada for the Smart Renewables and Electrification Pathways Program, which in turn will support the renewable electricity and grid modernization projects across Canada.
GlobalData Country Risk Index (GCRI) – Q2 2022
Canada was ranked 14th out of 152 nations in the GCRI Q2 2022. The country’s score is in the very low risk nations band (below 30). Canada’s overall risk score was marginally higher than the North American average, but lower than the world average in GCRI Q2 2022. The country had an overall score of 23.09 out of 100 and performed well in the political, legal, and environmental parameters. Its risk score was relatively higher in the macroeconomic, demographic and technology parameters.
GCRI Methodology
GlobalData’s unique Country Risk Model determines the existing and future level of country risk by assessing various qualitative and quantitative factors. The index is designed to help firms formulate their global business strategies based on historical developments in an economy.
The Country Risk Index incorporates the latest available macroeconomics, political, social, technological, environmental, and legal data from a range of recognized national and international statistical sources, and also proprietary data from GlobalData. North American nations in this publication include the US and Canada.
About the report
GlobalData Macroeconomic Outlook report is designed to provide detailed macro-economic analysis which will help clients in their business planning, investment and strategic decisions, and analysis. It also provides a quick view of the current situation and the risk score of the country in comparison to region and world based on the proprietary risk framework. The report also highlights key strengths, weaknesses, opportunities, and threats in each of the pillars of PESTLE, economic growth prospects, and key events which can impact the country’s future outlook.
More details: Macroeconomic Outlook Report: Canada
Related Data & Insights
Still looking?
Don’t wait - discover a universe of connected data & insights with your next search. Browse over 28M data points across 22 industries.
Explorer
Access more premium companies when you subscribe to Explorer