Economic indicators paint a stark contrast to the Liberal government’s rosy assessment
Canada remains a chronic underachiever. Our economy contracted by 1.06 per cent quarter-over-quarter in the third quarter, while the United States economy grew by 5.2 per cent. The European Union and Australia also saw modest economic growth.
We may not technically be in a recession yet, but the picture isn’t looking good, according to Bank of Montreal economist Doug Porter.
“Whatever label you slap on this economy, it’s basically not growing, despite the artificial sweetener of rapid population growth,” he told CBC News. “The big picture is that the Canadian economy is struggling to grow, yet managing to just keep its head above recession waters.”
The question is: how does a country with so much potential and a massive resource endowment end up lagging behind its peers? The answer is simple: Canada’s federal government is run by economic neophytes.
On Nov. 21, Finance Minister Chrystia Freeland boasted that, “Canada is now a global investment destination of choice … and the IMF projects Canada to likewise see the strongest economic growth in the G7 next year.”
But the most recent IMF projection is that U.S. GDP will increase by 2.1 per cent in 2023, but Canada’s will only grow by 1.3 per cent.
As for being the “investment destination of choice,” the figures show otherwise. Net foreign direct investment (FDI) plummeted throughout much of the Liberals’ first term. According to figures from the World Population Review, last year, the U.S. led the world, with net FDI inflows of $388 billion, followed by China ($180 billion), Singapore ($141 billion), Hong Kong ($121 billion), France ($105 billion), Brazil ($92 billion), Australia ($67 billion) and Canada ($54 billion).
Canada’s economic prospects are not so rosy, either. In its summary of an IMF report released over the summer, the Fraser Institute noted: “Expanding the population and workforce does increase the size of the economy, but the IMF observes that it’s ‘not a recipe for growing per capita income or living standards.’ And the data show that this is where Canada has been failing short; prosperity on a per-person basis has been stagnant since the mid-2010s.…
“As for Canada’s investment climate, the IMF suggests it has deteriorated relative to comparator jurisdictions. As evidence, the report cites the fact that gross fixed capital formation (a broad measure of investment) puts Canada in the bottom quartile among the 38 countries that are members of the OECD.…
“To explain sluggish Canadian investment, the IMF highlights insufficient product market competition, restrictions on foreign direct investment and government-fostered policy uncertainty that’s hindering new investment in the mining and energy sectors in particular.…
“Since 2017, Canada has lost almost all the business tax advantages it previously enjoyed vis-à-vis the United States, a development that undeniably has made the country a less attractive place to deploy capital than it was a decade ago.”
In 2022, Canada’s “Household debt, loans and debt securities” as a proportion of the country’s GDP was the highest in the G7. Canada’s indebtedness was equivalent to 102 per cent of its GDP; the United Kingdom was 83 cent; the U.S. was 74 per cent; Germany was 55 per cent; Italy 42 per cent; France 66 per cent; and Japan was 68 per cent.
The second metric is Canada’s excessive price-to-income ratio, or the median price paid for property compared to average disposable income. In the middle of this year, Canada’s ratio was 9.6, more than double the U.S. ratio of 4.2.
On top of this, excessive government deficits (federal and provincial) hobble Canada’s economy with debt and interest payments. This was foreseen in 2021 when the OECD predicted that Canada will be the worst performing economy for the next decade, and for three decades after that.
Numbers matter.
OTTAWA – Statistics Canada says wholesale sales, excluding petroleum, petroleum products, and other hydrocarbons and excluding oilseed and grain, rose 0.4 per cent to $82.7 billion in July.
The increase came as sales in the miscellaneous subsector gained three per cent to reach $10.5 billion in July, helped by strength in the agriculture supplies industry group, which rose 9.2 per cent.
The food, beverage and tobacco subsector added 1.7 per cent to total $15 billion in July.
The personal and household goods subsector fell 2.5 per cent to $12.1 billion.
In volume terms, overall wholesale sales rose 0.5 per cent in July.
Statistics Canada started including oilseed and grain as well as the petroleum and petroleum products subsector as part of wholesale trade last year, but is excluding the data from monthly analysis until there is enough historical data.
This report by The Canadian Press was first published Sept. 13, 2024.
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VICTORIA – British Columbia is forecasting a record budget deficit and a rising debt of almost $129 billion less than two weeks before the start of a provincial election campaign where economic stability and future progress are expected to be major issues.
Finance Minister Katrine Conroy, who has announced her retirement and will not seek re-election in the Oct. 19 vote, said Tuesday her final budget update as minister predicts a deficit of $8.9 billion, up $1.1 billion from a forecast she made earlier this year.
Conroy said she acknowledges “challenges” facing B.C., including three consecutive deficit budgets, but expected improved economic growth where the province will start to “turn a corner.”
The $8.9 billion deficit forecast for 2024-2025 is followed by annual deficit projections of $6.7 billion and $6.1 billion in 2026-2027, Conroy said at a news conference outlining the government’s first quarterly financial update.
Conroy said lower corporate income tax and natural resource revenues and the increased cost of fighting wildfires have had some of the largest impacts on the budget.
“I want to acknowledge the economic uncertainties,” she said. “While global inflation is showing signs of easing and we’ve seen cuts to the Bank of Canada interest rates, we know that the challenges are not over.”
Conroy said wildfire response costs are expected to total $886 million this year, more than $650 million higher than originally forecast.
Corporate income tax revenue is forecast to be $638 million lower as a result of federal government updates and natural resource revenues are down $299 million due to lower prices for natural gas, lumber and electricity, she said.
Debt-servicing costs are also forecast to be $344 million higher due to the larger debt balance, the current interest rate and accelerated borrowing to ensure services and capital projects are maintained through the province’s election period, said Conroy.
B.C.’s economic growth is expected to strengthen over the next three years, but the timing of a return to a balanced budget will fall to another minister, said Conroy, who was addressing what likely would be her last news conference as Minister of Finance.
The election is expected to be called on Sept. 21, with the vote set for Oct. 19.
“While we are a strong province, people are facing challenges,” she said. “We have never shied away from taking those challenges head on, because we want to keep British Columbians secure and help them build good lives now and for the long term. With the investments we’re making and the actions we’re taking to support people and build a stronger economy, we’ve started to turn a corner.”
Premier David Eby said before the fiscal forecast was released Tuesday that the New Democrat government remains committed to providing services and supports for people in British Columbia and cuts are not on his agenda.
Eby said people have been hurt by high interest costs and the province is facing budget pressures connected to low resource prices, high wildfire costs and struggling global economies.
The premier said that now is not the time to reduce supports and services for people.
Last month’s year-end report for the 2023-2024 budget saw the province post a budget deficit of $5.035 billion, down from the previous forecast of $5.9 billion.
Eby said he expects government financial priorities to become a major issue during the upcoming election, with the NDP pledging to continue to fund services and the B.C. Conservatives looking to make cuts.
This report by The Canadian Press was first published Sept. 10, 2024.
Note to readers: This is a corrected story. A previous version said the debt would be going up to more than $129 billion. In fact, it will be almost $129 billion.
The Canadian Press. All rights reserved.
NANAIMO, B.C. – Former Bank of Canada governor Mark Carney says he’ll be advising the Liberal party to flip some the challenges posed by an increasingly divided and dangerous world into an economic opportunity for Canada.
But he won’t say what his specific advice will be on economic issues that are politically divisive in Canada, like the carbon tax.
He presented his vision for the Liberals’ economic policy at the party’s caucus retreat in Nanaimo, B.C. today, after he agreed to help the party prepare for the next election as chair of a Liberal task force on economic growth.
Carney has been touted as a possible leadership contender to replace Justin Trudeau, who has said he has tried to coax Carney into politics for years.
Carney says if the prime minister asks him to do something he will do it to the best of his ability, but won’t elaborate on whether the new adviser role could lead to him adding his name to a ballot in the next election.
Finance Minister Chrystia Freeland says she has been taking advice from Carney for years, and that his new position won’t infringe on her role.
This report by The Canadian Press was first published Sept. 10, 2024.
The Canadian Press. All rights reserved.
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