Economy

How Canada Makes Its Money

Published

3 years ago

June 30, 2021

Economic diversity is the key to Canada’s success at making money—when one part of the country is suffering economically, another is booming. Canada is the second-largest country in the world with a surface area of over 3.8 million square miles.¹ There are about 38 million people living in Canada, and with a gross domestic product (GDP) of over $1.73 trillion, it’s the tenth largest economy in the world.2

³ Four industries that bring in a good portion of the revenue for Canada are 1) oil and gas, 2) energy, 3) manufacturing, and 4) tourism.

Oil & Gas

The oil and gas industry is a large part of the Canadian economy, and it suffered immensely when the price of oil fell in late 2014. While the price-per-barrel has rebounded somewhat since hitting a low in early 2016, the myriad of factors that impact the price of oil (and can cause it to fluctuate dramatically) have given Canada the incentive to diversify into other energy revenue sources.⁷https://76821752109848969f7570b823586b33.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

Canada’s Oil Provinces

Canada currently has the third-largest oil patch in the world, most of it in oil sands and crude. Oil is found throughout Canada, with the largest onshore reserves being in the western provinces of Alberta, and Saskatchewan. There is also oil offshore near the provinces of Newfoundland and Nova Scotia.⁸https://76821752109848969f7570b823586b33.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

Alberta is an oil province. The Athabasca Oil Sands are still far from their peak production, yet, with the province collecting royalties on each barrel sold, almost 30% of the province’s revenue comes from oil.⁹ ¹⁰ This figure is alarming to some, and, as can be expected, a fall in the price of oil can lead to a budgetary crisis.

Other Oil Industries

In addition to oil production, the western provinces are also home to oil-related industries. From exploration to petrochemicals to plastics, Canada earns a lot of money from oil. The two largest cities in Alberta—Edmonton and Calgary—are home to hundreds of oil headquarters and laboratories. In the north, cities have been built for the sole purpose of supporting the oil and gas industry.https://76821752109848969f7570b823586b33.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

Canada exports about 3.7 million of the 4.6 million barrels of crude oil it produces a day. Most of these exports go to the United States through various pipelines. Canadian oil companies are hoping to begin exporting oil to new markets—provided they can get pipelines built to ferry the oil away from the landlocked, northern oil patches.https://76821752109848969f7570b823586b33.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

Energy

Oil and gas aren’t the only energy revenue sources in Canada. The country has huge coal deposits in the western provinces of British Columbia an Alberta that are exported to Asian countries.¹¹ The province of Quebec has uranium and other mineral mines, and Alberta, Quebec, Nova Scotia, and Prince Edward Island are home to many wind farms.¹² ¹³

The big energy earner, though, comes from a mostly renewable, alternative energy source: hydroelectricity. Hydro plants are found in every province except Prince Edward Island, and while a lot of it is cheaply sold to and used by Canadians, several provinces export a much larger percentage than they consume.¹⁴ Quebec, for example, exports hydro-electricity to Vermont, Massachusetts, and New York, in addition to selling it to other provinces. The Pacific Northwest and northern Midwest also import Canadian hydro-electricity.¹⁵

Manufacturing

The Canadian dollar has been declining at a rapid pace: $1 USD could buy $1.07 CAD in July 2014; it can fetch $1.33 CAD as of Feb. 2020.¹⁶ While Canadians now have to pay more for imports, the weak dollar is great news for the Canadian manufacturing sector, which produces food, machinery, motor vehicles, and aerospace manufacturing.

The central province of Ontario has been building cars for General Motors (GM), Ford (F), and Chrysler for at least 50 years, and the Ambassador Bridge, which connects Detroit to the Canadian automotive city of Windsor, carries 30% of Canada’s exports by road.¹⁷ ¹⁸ Quebec is home to Bombardier, a company that designs and builds snowmobiles, buses, aircraft, and trains that are sold internationally.¹⁹

Tourism

Canada is the second-largest country in the world and has a very diverse geography, history, and culture, making it a prime tourist destination.¹ The country’s diversity, as well as hosting three Olympic Games and having 20 UNESCO World Heritage Sites, means there is something for everyone in Canada.²⁰ ²¹ In the northern territories, visitors can see the Northern Lights and explore the polar ice fields. They can check out Vancouver, the Rocky Mountains, dinosaur parks, festivals, and museums in the western provinces.

In the central and eastern provinces, tourists can visit historical sites, Niagara Falls, Montreal, Quebec City, and Ottawa, as well as hundreds of museums and festivals. There are national parks throughout the country that are worth a trip for the nature-loving traveler.

The tourism industry in Canada employs 1.7 million people and is supported by 22.1 million international visitors each year.²² ⁵ With $92 billion in annual revenue, tourism accounts for a $34 billion increase to the Canadian GDP.²²

About 70% of the overseas tourists to Canada came from the United States in 2019, spending $10.6 billion during their stay according to the most recent estimates from 2018.²³ ⁵

Other Revenue Sources

Agriculture

Farms cover the Canadian countryside with the obvious exception of the northern territories. Canadian farms grow grain, fruits, and vegetables, along with raising cattle for dairy and meat. Crops are also transformed into a variety of products, not limited to wine, beer, candy, and whiskey. Canada is also a big producer of honey and of maple syrup, and large percentages of the country’s agricultural products and by-products are exported.²⁴ ²⁵ ²⁶

Fishing

Despite fishing being the sole economic resource for many coastal communities, the fishery industry is not well-known to most Canadians. The fishing industry employs approximately 75,000 people and adds about $6 billion to the economy.²⁷ ²⁸

Government

Lastly, the government is the main provider of education and health care in the country. Education until high school is, more or less, free, and post-secondary education is relatively low, and often subsidized.²⁹ Medically necessary health care is provided free of charge by the government.³⁰ As a major employer in each province, the federal government ensures a steady income for about 288,000 Canadians.⁶

The Bottom Line

If visitors were to come to Canada to view the ways that Canada makes money, they would be overwhelmed with the stops on the tour. However, despite a diversified economy and strong economic plans for the future, the Canadian economy has shown modest growth. Real GDP gained only 1.65% in 2019 and is forecasted to grow by 1.8% in 2020.³¹

For Canada to continue to make money and improve its prospects, experts say more money will need to be spent on business investment.³² The Canadian government, on the other hand, is under pressure to maintain fiscal responsibility, which could put a damper on efforts to grow the economy through various business sectors.

Economy

Canada’s unemployment rate holds steady at 6.5% in October, economy adds 15,000 jobs

Published

1 day ago

November 8, 2024

Anne Joseph

OTTAWA – Canada’s unemployment rate held steady at 6.5 per cent last month as hiring remained weak across the economy.

Statistics Canada’s labour force survey on Friday said employment rose by a modest 15,000 jobs in October.

Business, building and support services saw the largest gain in employment.

Meanwhile, finance, insurance, real estate, rental and leasing experienced the largest decline.

Many economists see weakness in the job market continuing in the short term, before the Bank of Canada’s interest rate cuts spark a rebound in economic growth next year.

Despite ongoing softness in the labour market, however, strong wage growth has raged on in Canada. Average hourly wages in October grew 4.9 per cent from a year ago, reaching $35.76.

Friday’s report also shed some light on the financial health of households.

According to the agency, 28.8 per cent of Canadians aged 15 or older were living in a household that had difficulty meeting financial needs – like food and housing – in the previous four weeks.

That was down from 33.1 per cent in October 2023 and 35.5 per cent in October 2022, but still above the 20.4 per cent figure recorded in October 2020.

People living in a rented home were more likely to report difficulty meeting financial needs, with nearly four in 10 reporting that was the case.

That compares with just under a quarter of those living in an owned home by a household member.

Immigrants were also more likely to report facing financial strain last month, with about four out of 10 immigrants who landed in the last year doing so.

That compares with about three in 10 more established immigrants and one in four of people born in Canada.

This report by The Canadian Press was first published Nov. 8, 2024.

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Economy

Health-care spending expected to outpace economy and reach $372 billion in 2024: CIHI

Published

3 days ago

November 6, 2024

Anne Joseph

The Canadian Institute for Health Information says health-care spending in Canada is projected to reach a new high in 2024.

The annual report released Thursday says total health spending is expected to hit $372 billion, or $9,054 per Canadian.

CIHI’s national analysis predicts expenditures will rise by 5.7 per cent in 2024, compared to 4.5 per cent in 2023 and 1.7 per cent in 2022.

This year’s health spending is estimated to represent 12.4 per cent of Canada’s gross domestic product. Excluding two years of the pandemic, it would be the highest ratio in the country’s history.

While it’s not unusual for health expenditures to outpace economic growth, the report says this could be the case for the next several years due to Canada’s growing population and its aging demographic.

Canada’s per capita spending on health care in 2022 was among the highest in the world, but still less than countries such as the United States and Sweden.

The report notes that the Canadian dental and pharmacare plans could push health-care spending even further as more people who previously couldn’t afford these services start using them.

This report by The Canadian Press was first published Nov. 7, 2024.

Canadian Press health coverage receives support through a partnership with the Canadian Medical Association. CP is solely responsible for this content.

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Economy

Trump’s victory sparks concerns over ripple effect on Canadian economy

Published

3 days ago

November 6, 2024

Anne Joseph

As Canadians wake up to news that Donald Trump will return to the White House, the president-elect’s protectionist stance is casting a spotlight on what effect his second term will have on Canada-U.S. economic ties.

Some Canadian business leaders have expressed worry over Trump’s promise to introduce a universal 10 per cent tariff on all American imports.

A Canadian Chamber of Commerce report released last month suggested those tariffs would shrink the Canadian economy, resulting in around $30 billion per year in economic costs.

More than 77 per cent of Canadian exports go to the U.S.

Canada’s manufacturing sector faces the biggest risk should Trump push forward on imposing broad tariffs, said Canadian Manufacturers and Exporters president and CEO Dennis Darby. He said the sector is the “most trade-exposed” within Canada.

“It’s in the U.S.’s best interest, it’s in our best interest, but most importantly for consumers across North America, that we’re able to trade goods, materials, ingredients, as we have under the trade agreements,” Darby said in an interview.

“It’s a more complex or complicated outcome than it would have been with the Democrats, but we’ve had to deal with this before and we’re going to do our best to deal with it again.”

American economists have also warned Trump’s plan could cause inflation and possibly a recession, which could have ripple effects in Canada.

It’s consumers who will ultimately feel the burden of any inflationary effect caused by broad tariffs, said Darby.

“A tariff tends to raise costs, and it ultimately raises prices, so that’s something that we have to be prepared for,” he said.

“It could tilt production mandates. A tariff makes goods more expensive, but on the same token, it also will make inputs for the U.S. more expensive.”

A report last month by TD economist Marc Ercolao said research shows a full-scale implementation of Trump’s tariff plan could lead to a near-five per cent reduction in Canadian export volumes to the U.S. by early-2027, relative to current baseline forecasts.

Retaliation by Canada would also increase costs for domestic producers, and push import volumes lower in the process.

“Slowing import activity mitigates some of the negative net trade impact on total GDP enough to avoid a technical recession, but still produces a period of extended stagnation through 2025 and 2026,” Ercolao said.

Since the Canada-United States-Mexico Agreement came into effect in 2020, trade between Canada and the U.S. has surged by 46 per cent, according to the Toronto Region Board of Trade.

With that deal is up for review in 2026, Canadian Chamber of Commerce president and CEO Candace Laing said the Canadian government “must collaborate effectively with the Trump administration to preserve and strengthen our bilateral economic partnership.”

“With an impressive $3.6 billion in daily trade, Canada and the United States are each other’s closest international partners. The secure and efficient flow of goods and people across our border … remains essential for the economies of both countries,” she said in a statement.

“By resisting tariffs and trade barriers that will only raise prices and hurt consumers in both countries, Canada and the United States can strengthen resilient cross-border supply chains that enhance our shared economic security.”

This report by The Canadian Press was first published Nov. 6, 2024.

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