Canada's Economic Environment

Canada’s Economic Environment:

The Type of Economy and Level of Industrialization in Canada

Canada has a diversified, vibrant, and growing economy. In fact, Canada has the tenth largest economy in the world, is one of the world's wealthiest nations, and is a member of the Organization for Economic Co-operation and Development (OECD) and Group of Eight (G8).

Canada has one of the highest levels of economic freedom in the world. As an affluent, high-tech industrial society in the trillion-dollar class, today Canada closely resembles the United States in its market-oriented economic system, pattern of production, and affluent living standards. Since World War II, the impressive growth of the manufacturing, mining, and service sectors has transformed the nation from a largely rural economy into one primarily industrial and urban.

As with other developed nations, the Canadian economy is dominated by the service industry, which employs about three quarters of Canadians. Canada is unusual among developed countries in the importance of the primary sector, with the logging and oil industries being two of Canada's most important. Natural resources industries, such as forestry, mining, oil and gas extraction, farming and fishing, are important sources of jobs and export earnings. Canada is also a world leader in the fields of telecommunications, biotechnology, aerospace technologies, and pharmaceuticals. More and more jobs involve work in service industries or in information technology. Canada also has a sizable manufacturing sector, centered in Central Canada, with the automobile industry especially important.

International trade makes up a large part of the Canadian economy, particularly of its natural resources. The United States is by far its largest trading partner, accounting for about 76% of exports and 65% of imports as of 2007. Canada's combined exports and imports ranked 8th among all nations in 2006.

Canada has considerable natural resources spread across its varied regions. In British Columbia, the forestry industry is of great importance, while the oil industry is important in Alberta and Newfoundland and Labrador. Northern Ontario is home to a wide array of mines, while the fishing industry has long been central to the character of the Atlantic Provinces, though it has recently been in steep decline. These industries are increasingly becoming less important to the overall economy. Only some 4% of Canadians are employed in these fields, and they account for less than 6% of GDP. They are still paramount in many parts of the country. Many, if not most, towns in northern Canada, where agriculture is difficult, exist because of a nearby mine or source of timber.

Given its great natural resources, skilled labor force, and modern capital plant, Canada has enjoyed solid economic growth, and prudent fiscal management has produced consecutive balanced budgets from 1997 to 2007. Canada had the fastest growing economy among the G-7 industrial countries in 1999, with real GDP expanding by 4.2%. Since the early 1990s, the Canadian economy has been growing rapidly, with low unemployment and large government surpluses on the federal level. In 2008, growth slowed sharply as a result of the global economic downturn, US housing slump, plunging auto sector demand, and a drop in world commodity prices. As of June 2009, Canada's national unemployment rate stood at 8.6% as the effect of the world economic crisis settled in and more people looked for work.

Tight global credit conditions have further restrained business and housing investment, despite the conservative lending practices and strong capitalization that made Canada's major banks among the most stable in the world. According to the Forbes Global 2000 list of the world's largest companies in 2008, Canada had 69 companies in the list, ranking 5th next to France. As of 2008, Canada’s total government debt burden is the lowest in the G8.

Summary:

To summarize the subject of the Canadian economic environment, Canada is currently experiencing strong economic growth; however, in order to maximize and sustain the potential of the country’s economy, it is necessary to continue economic diversification efforts in order to alleviate the vulnerability associated with increased global competition and the region’s traditional reliance on natural resource sectors. At the same time, tremendous economic opportunities exist within Canada: the country is already demonstrating strengths in emerging industries and the new economy; the small business sector is vibrant and offers significant potential for expansion; and, the nation is geographically and strategically positioned to increase its international trade and attract investment. By systematically responding to its challenges while making strategic investments to support development and diversification, Canada will continue to thrive economically.