Canada Economy

Canada Economy


  • Basic data
  • Public finances and the state budget
  • Banking system
  • Tax System

Basic data

The growth rate of the Canadian economy has been declining since 2017 and was close to zero before the arrival of the coronavirus pandemic. In 2020, the Canadian economy contracted by 5.2% due to the crisis and unemployment rose by 9.6 pp year-on-year. in 2022 it is expected to grow by 3.8%. The level of unemployment should then return to the pre-pandemic level. Despite signs of economic recovery, Canada faces high inflation, rising to 3.3% year-on-year in 2021 and rising to a record 6.7% in early 2022. In addition to rising inflation, further growth of the economy may be affected by an uneven recovery within the sector and the associated labor shortage in the most affected services. Check ebizdir for economical facts of Canada.

The territory of Canada is administratively divided into ten provinces and three territories. Currently, two main disparate economic areas can be distinguished. The eastern part of the country, home to approximately 70% of the Canadian population, is dominated by consumer industries and the service sector. The area of ​​Toronto and its surroundings in the province of Ontario, with its strong automotive industry, is particularly important here. The province of Québec is famous for its developed aviation and space industry. The western part of the country has a strong agricultural and raw material base, including the mining industry. In Alberta and Saskatchewan, it is about the extraction of oil and natural gas and other raw materials, the westernmost province of British Columbia is known for its timber industry, it also mines other raw materials, mainly metals. The service and logistics center is Vancouver. However, Western Canada also represents an environment promising for export and the development of new industries. At the same time, the Canadian prairie region remains a strong agrarian center.

Canada mainly exports industrial products (automobiles, light commercial vehicles, aerospace), consumer goods and commodities (oil, which is the largest export item, gold, wood), then imports machinery, means of transport and electrical equipment. machinery and equipment. The main trading partner is the USA, where approximately three-quarters of Canadian exports go.

Pointer 2019 2020 2021 2022 2023
GDP growth (%) 1.9 -5.3 4.6 3.8 3.3
GDP/population (USD/PPP) 52,070.10 46,371.20 49,640.00 53,220.00 55,920.0
Inflation (%) 2 0.8 3.3 3.8 2.3
Unemployment (%) 5.8 9.6 7.4 6 5.8
Export of goods (billion USD) 450.8 378.1 494.4 509.6 513.6
Import of goods (billion USD) 462.4 406.7 487.8 504.6 509.4
Trade Balance (Billion USD) -11.6 -29.7 6,7 5.1 4.3
Industrial production (% change) -0.3 -8.6 5.1 2.6 2.8
Population (millions) 37.4 37.7 38.1 38.4 38.7
Competitiveness 13/63 VIII.63 14/64 ON ON
OECD export risk ON ON ON ON ON

Source: EIU, OECD, IMD

Public finance and state budget

Public finance 2021
State budget balance (% of GDP) -9.5
Public debt (% of GDP) 111.6
Current account balance (billion USD) 5.8
Taxes 2022
F.O 15-33%
VAT 5%

Since the beginning of the pandemic, the Canadian government has focused on helping as many companies and employees as possible, which has ensured a rapid and strong recovery of the Canadian economy. In the past fiscal year, the Canadian government ran a deficit of approximately CAD 114 billion, with a deficit of CAD 354 billion during the first year of the pandemic. For the next period, thanks to the positive development of the economy, further reduction of the deficit is expected.

In early April 2022, Canada’s new federal budget for the 2022-2023 fiscal year was presented. The federal budget aims to reduce the deficit to 53 billion dollars (2% of GDP) and thus contribute together with the provinces to the gradual reduction of the ratio of public debt to GDP. Thanks to the economic recovery, high commodity prices and the gradual end of pandemic measures, revenues in 2021 were higher than expected, accompanied by lower expenses related to the pandemic. The new budget proposal fulfills the Liberal government’s commitment to keep the federal debt below 50% of GDP, which is expected to decrease from the current 46.5% to 41.5% in the 2026-2027 fiscal year. However, rising costs for servicing the public debt or the normalization of economic growth can be a challenge to achieving these goals.

Canadian exports in 2021 increased by 20% year-on-year to CAD 637 billion, surpassing the pre-pandemic 2019 by 7%, imports increased by 12% year-on-year to CAD 631 billion. The trade surplus thus stood at CAD billion (US$billion) for 2021, the first such surplus since 2014 and the largest since 2008.

Banking system

Canada’s banking system is considered one of the safest in the world. The main regulator of the banking sector is the Bank of Canada (BoC). The regulation and supervision of financial services is carried out through a system of shared responsibility between the federal government and the provincial governments. Apart from the central bank, the sector is regulated by the Department of Finance, the Office of the Superintendent of Financial Institutions and the Financial Consumer Agency of Canada.

There are 82 banks operating in Canada, including 35 domestic banks and branches and subsidiaries of foreign banks. In addition, there are trust companies, credit companies, co-operative credit associations, co-operative retail associations and insurance companies in Canada. Canada’s banking industry is relatively concentrated, dominated by 10 large banks that hold roughly 90% of the total assets of all Canadian federally regulated depository institutions. These banks are highly diversified both domestically and abroad, and are active in a number of countries. The remaining 10% of Canadian banking assets are held by smaller institutions such as mortgage, loan or commercial real estate companies. Among the so-called “Big Five Banks”, representing the five largest banks in Canada, according to market capitalization are the Toronto-Dominion Bank Group (TD – highest assets, evaluated as the safest bank in North America), Royal Bank of Canada (RBC – the largest market share with the largest number of branches), Bank of Nova Scotia (the third largest bank with representation in 55 countries in the world), Bank of Montreal (BMO – the fourth largest and at the same time the oldest Canadian bank) and the Canadian Imperial Bank of Commerce (CIBC). The largest foreign bank is HSBC Bank Canada, which operates in Canada as a wholly owned subsidiary of the British financial giant HSBC Holdings plc.

The official interest rate is the overnight rate, which is set by the Board of Governors of the Bank of Canada. In order to limit the rapid growth of inflation, it was increased by 0.75 percentage points to 1% in spring 2022.

Tax system

The Canadian tax system is considered to be quite complicated, but stable. Tax laws are administered by both the federal and provincial governments. However, tax collection is managed by the federal government through the Canada Revenue Agency (CRA). Taxes are levied at the federal, provincial/territorial and municipal levels.

Federal taxes include:

  • FO (Federal Income Tax), progressive tax, rate 15-33% (27.6% for residents of the province of Québec); due to rising inflation, tax bands for individual rates were increased
  • Canada Pension Plan
  • Employment Insurance (EI)
  • PO income taxes (Federal Corporation Tax), rate 15%
  • Goods and Services Tax – equivalent to VAT (Goods and Services Tax – GST), rate 5%
  • Consumption tax (Federal Excise Tax), levied on alcoholic beverages, tobacco or petroleum products (including gasoline)
  • Capital Gains Tax

Provincial and territorial taxes include:

  • Income tax FO (Income Tax), progressive tax, rate 11.5-21%
  • PO income tax (Corporation Tax), rate 8-16%
  • Goods and Services Tax – equivalent to Provincial Sales Tax (PST), rate 0-9.975% (often combined with GST into one tax)
  • Tax on extraction of raw materials (Royalties)
  • Excise tax on gasoline

Municipal taxes include:

  • Business tax
  • Property tax

Note: A complete overview of tax rates can be found on the website of the Canada Revenue Agency. In 2020, many tax reliefs were introduced for entrepreneurs and individuals to ease the consequences of the COVID-19 pandemic. According to the budget for the period 2021-2022, the introduction of a 3% tax on digital services for companies with revenues above EUR 750 million is still expected (however, its implementation is still in process), luxury taxes on high-class cars, ships and passenger planes between 10 – 20% (the draft law has already been published, it is to apply from September 2022) or by taxing unoccupied houses owned by others with a one percent tax. The draft of the new budget for the period 2022-2023 then proposes to permanently increase the corporate income tax rate by percentage points on the taxable income of banking and life insurance groups above CAD 100 million.

Canada Economy