The Canadian Economy Case Study

Analysis by:

Buctuan, Dexter M.

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 ABSTRACT

The world prior to the start of the industrial revolution had been already divided based
from different variables – political, social, and cultural. It was then the result of Industrial
Revolution counties across the world are leveled superior and inferior in the economic context.
Starting on the 19th century the concept of being a developed, developing and least developed
countries was incepted and identifies which status does a nation belong. Now, with the modern
economic indicators, nations can be classified to what status it belongs – developed, least
developed or still developing.

This paper provides an in-depth analysis into one of the worlds considered developed
country, which is Canada as the subject. The country belongs to the top of the world’s
economic standings – according to different key economic indicators that includes both
indicators of growth and development. Analysis includes queries, economically related that are
significant for the better understanding about the country’s economic status.

Prior to this 21st century, Canada is a nation that already achieved the level of a
developed status along the other nations, such as the United States and European countries.
Meanwhile, there are still nations of the world who are still struggling to grow its economy and
raise its citizens standards of living. With this analysis, factors with regards to the growth and
development are identified to ponder the knowledge on how other nations prosper, while
others are not through a comparative analysis between nations with different economic status.

Also, economic concepts, theories of growth and development, types of economy, fiscal
and monetary policy are utilized and incorporated in able to study the economic behaviors and
conditions of Canada. Through utilizing different perspectives of knowledge, it will result into a
wider, informative and detailed analysis about the patterns of economic growth and
development of Canada as the subject country.

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 TABLE OF CONTENTS

Contents Page

Title page 1
Abstract 2
Table of Contents 3
Introduction 3-4
Body: 16 - 14
Canadian Economic Structure 6
Canada a Super Economy? 6-7
Fundamentals of Canadas Economic Growth 7-9
Canada Macroeconomic Overview 9 - 10
Canada and the Philippines Economy 10 - 12
Super Economy on Crisis 13
European Economy stays the Prime 14
Conclusions 15

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 INTRODUCTION

Canada as one of the most developed country (MDC) has a highly developed market
economy – 9th largest GDP by nominal, and 15 th largest GDP by purchasing power parity
(PPP) in the world. It does also belong to the top 10 nations in terms of trading activity level.
Canada members to different intercontinental economic and non-economic organizations,
most significant of this is the North America Free Trade Agreement (NAFTA) that eliminates
most barriers of trade among its members. According to the United Nations Human
Development Report (UNHDR), the country sits at the 16 th on the human development index
(HDI) world ranking. Also, it is one of the least corrupt nation based on the corruption
perception index (CPI). Lastly, it has the highest levels of economic freedom, which made the
country such a significant model of a free-market economy having a lesser government
supervision on the sectors of economy.

With those given economic background, we can easily consider that Canada is a
developed country. But how about the other details and statistical data? Does having a further
researching to a more concise economic data matter? Yes, it does, analyzing into the smallest
components, factors and other economic related concepts are necessary to be able to
understand the aggregate economy of a certain nation. It wouldn’t be enough to solely rely in
the over all economic statistics to determine if a nation is neither developed or not.

Much further, economic analysis requires a high standard of rationale about the subject
matter. Thus, it will be a significant approach of studying various economic growth and
development drivers to find out for the answers to the following questions: How Canada
became a developed country? And what are its significant assets of its economy. All of these
are relatively important for having a clear depiction of the whole Canadian economy.

But why study and analyze the Canadian economy? Economic analysis to a particular
country whether is considered most developed country (MDC) or a least developed country
(LDC) is a significant milestone of study to answer the frequently asked economic questions:
Why there are most developed countries (MDC’s) and least developed countries (LDC’s)? And
what would be the possible economic trends for the MDC’s and LDC’s in the future perception.

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 The Canadian economy is such a promising subject matter of economy that it can be
both interesting and vital to be discuss. Canada’s patterns of economic growth and
development serves as a tested framework for other nations of the world, particularly for the
least developed and developing to also reach the status of a developed country and be a
caution for the pros and cons of economic growth and development.

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Canadian Economic Structure

The growth and development to a particular country is heavily influence by the type of
economy or the economic system that is attributed to a country. We can classify into 3 major
economic system – traditional, command, and the market economy. Systems of economy
answers the questions: What goods/services will be produced? How will goods/services will be
produced? Lastly, who will consume the goods and services?

Canada is one of the world’s most highly developed market economy being dominated
by service industry employing about three quarters of Canadian population. The Canadian
service industry accounts for about 70% of GDP on the year 2019, and 12% of the population
are employed to the retail sector. In the fiscal year 2019-2020, the government spent 303
billion dollars for services and health care of the old age division of its population.

However, around the world, there is no such thing as having a total single system of
economy. One of the basic economic trends entails that there is only a dominion of an
economic system to a country. In short, each country of the world whether MDC’s and LDC’s
are enjoying a mixed economy. Although Canada is dominated with a market economy, which
have a lesser government intervention, there are still provinces practicing a traditional
economic system (e.g., Inuit Canada). Even ranks as having the highest levels of economic
freedom, Canadian government still plays an important role of intervention to its economy.

Canada a Super Economy?

Aside from the European nations that are obviously characterized with super power in
terms of political system and most importantly in the economic aspect, the Canadian economy
is also highly developed along with the United States. Canada is abundant with the 4 major
factors of economic growth – natural resources, human capital, capital formation, and
technology advancement.

Canada is the 2nd largest country by land mass (3, 602, 707 sq. miles). With this, the
country consists of a diverse economy, and it is a major key to Canada’s success, when one
part is suffering economically, another is actually booming. The country’s coastline is the

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world’s largest, and its fishing and seafood industry is the 8 th largest in the world. While the
largest contributor of its economy’s growth is the oil and gas industry, having the third largest
oil patch in the world. in the 2020 statistics, Canada exports about 3.7 million of the 4.6 million
barrels of crude oil it produces a day, mostly go to United States. With the abundant natural
resources, Canada is considered “energy superpower”.

Effective policies are also vital for the growth of the economy. Answering about the
demographic problem of Canada that has the world’s greatest number of old population and
one of the lowest birth rates, policies on immigration have seen to be an effective solution.
Canada’s immigration policy is being guided with the principles of valuing multiculturalism and
growing its economy by acquiring skilled workers from abroad. Acquisition of skilled workers
has been a trend in Canada to foster great number of labor force for having efficient and
productive economy.

With the country’s attracting immigration policy, Canada was able to welcome foreign
ideas and skills to inhabit the country and serves as a catalyst of economic growth. Welcoming
foreign work force helps a lot to major advances in technology, particular in the manufacturing
sector. The central province of Ontorio has been the center of building cars for General Motors
(GM), Ford, and Chrysler. On the year 2019, Canada is one the global leaders of the
entertainment software industry.

Lastly, to add on its strong economy, Canada is characterized with a well supervised
banking system to hold its steady growing capital formation. Canada’s gross fixed capital
formation data remains active status according to the Census and Economic Information
Center (CEIC). Although the US economy is a little stronger than Canada, however the
economy of the European Union countries are stronger than both of Canada’s and US
economy.

Fundamentals of Canadas Economic Growth

Economic diversity is a major factor to the success of the Canadian economy, offering
various forms of revenue sources mainly oil and gas, energy, manufacturing, and tourism

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industry. This enables the country to obtain economic equity and safety from the failure of one
economic sector while other sectors of economy are flourishing.

Canada’s energy industries operate in a free market economy, and investments by both
Canadian and foreign companies ensure an efficient, competitive, and innovative energy
system. In the world ranking of the top energy producers, Canada ranks as the 6 th largest
energy producer, while China being the first energy producing country with 18% of the total
world’s energy production on the year 2019. Having a diverse and abundant energy sources –
crude oil, coal, nuclear, renewable, and natural gas, the industry employed more than 282, 000
people and indirectly supported over 550, 500 jobs on the year 2019. It is the 4 th largest energy
exporter (90% of the exports goes to US), and the world’s 8 th largest energy consumer. In the
aggregate economy, the energy sector accounts 10.2% contribution to the Canadian nominal
GDP.

Manufacturing industries also became a cornerstone of Canada’s modern economy. It

represents 10% of Canada’s total GDP (174 billion dollars). Canadian manufacturers exports
for over 354 billion dollars each year, that is 68% of all Canada’s merchandise exports. The
industry is a large hub of over 1.7 million quality full time jobs, the province of Alberta alone is
home to 63% of all manufacturing facilities of the county.

Figure 1. shows the dispersion of manufacturing industries throughout the country and
the percentage of workforce accounted each industry.

PROVINCE INDUSTRY/s WORK FORCE

EMPLOYED (%)
Mining, gas, oil and machinery 9.5
Alberta manufacturing
Meat processing 6.4
Wood paneling manufacturing 4.3

Sawmill and wood production 9.7

British Columbia Meat processing 4.6
Wood paneling manufacturing 3.0
Meat processing 13.4
Manitoba Tractors and agricultural machinery 6.9
manufacturing
Printing 5.2

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 Seafood processing 56.8
Newfoundland and Bread production 1.2
Labrador Wood paneling production 0.9

Seafood processing 21.4

Nova Scotia Aerospace manufacturing 7.0
Ship and boat building 4.3
Fig.1
Another vital source of revenue of Canada is the tourism industry. Canada is the 2 nd
largest country in the world and has a very diverse geography, history, and culture, making it a
prime tourism destination. In the 2020 economic outlook of the country, tourism accounts for a
34 billion dollar increase to Canadas GDP with an annual revenue of 92 billion dollars. The
tourism department recorded over 22.1 million international visitors each year and employs 1.7
million of the population.

Most importantly, the oil and gas industry are one of the largest fundamental sources of
economic growth in the country. Canadas’s proven crude oil reserves are the 3 rd largest in the
world and the country has the 19 th largest proven natural gas reserves globally. Provinces of
Newfoundland, Nova Scotia, and in the western provinces of Alberta and Saskatchewan are
known to be the big-time oil provinces. Most of its exports goes to United States as its closest
trading partner, which both of the country are members of the North America Free Trade
Agreement (NAFT).

Other revenue sources of Canada includes agriculture (mostly in the countryside except
the northern territories) and fishing. The province of Saskatchewan is the farming center of
Canada, owns huge 40% of arable land that produces rye, oats, wheat, and barley. Large
percentage of the country’s agricultural products are exported. Fishing on the other hand
employs 75, 000 people and adds about 6 billion dollars to the economy.

Canada Macroeconomic Overview

Canada as the 2nd largest land area only accounts for having 37.5 million population
based on the 2019 population statistics of the country. Most of its skilled workers are hired
coming from abroad. The Canadian economy is very strong due to the abundant and

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diversified natural resources, strong – well capitalized and well supervised banking sector,
fiscal rigor, efficient trade relations and excellent business environment.

Figure 2. shows some major macro indicators of economic growth in relation to the
economic performance of Canada.

INDICATORS 2015 (%) 2016 (%) 2017 (%) 2018 (%) 2019 (%)
GDP growth 0.66 1.00 3.17 2.01 1.66
rate
Inflation 1.13 1.43 1.60 2.27 1.95

Unemploymen 6.9 6.99 6.34 5.83 5.67

t

Fig 2.
The Canadian economic trend is on its contraction state and currently on the stage 5 of
economic growth based on Rostow’s 5 stages of economic growth with a high level of mass
consumption. According to the World Bank, the country’s GDP per capita PPP was estimated
at 51, 341 dollars in 2019. And Canada’s population has a high and diversified level of mass
consumption in goods and services – purchases are mostly made in malls, mass retailers, and
retail parks.

Canada and The Philippine Economy

Canada’s economy is proven to be one of the highly developed in the in the world,
belonging to the state of being the most developed countries (MDC) due to its enormous large
scale of natural resources and friendly market economy. How about the least developed
countries (LDC’s) and on the developing process? Will they be able to achieve the developed
state as well? Let’s take the case of Philippines as one of the developing countries.

Philippines is the 12th among 40 countries in the Asia-Pacific region with the freest
economy with an economic freedom score of 6.41 (73 rd in the world). It has a mixed economic
system which includes a variety of private freedom, combined with centralized economic
planning and heavily influenced with government regulations. Unlike Canada being gifted with
abundant natural resources, Philippines key economic drivers relies mainly on the competitive

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workforce, stable markets, steady remittance, and investments (mostly on the construction
sector).

The Philippines according to World Bank is on its way from a lower middle-income
country with a gross national income per capita of 3, 850 US dollars in 2019 to an upper
middle-income country. Although Philippines is on the state of industrialization, agriculture is
still the significant sector of economy, in 2020 there are 22.5% of the country’s labor force
employed to this sector and contributed 8.8% of GDP. While being the 2 nd largest producer of
coconut in the world, agriculture sector suffers from low productivity, weak economies of scale,
and inadequate infrastructure.

Shifting from the industrial state, the industry sector of the country contributes for about
30.1% of GDP and employs 19.8% of the country’s labor force. The sector consists mainly with
industrial food manufacturing, cement production, iron and steel industry. On the other
hand,57.6% of the country’s labor force is employed to the service providing sector consists of
telecommunications, call center, and financing. Service sector represents the largest of the
Philippines GDP with 61.1% respectably.

Fig 3. shows some major macroeconomic indicators with regards to the economic
performance of Philippines comparing to Canada for the past 5 years.

INDICATORS 2015 2016 2017 (%) 2018 (%) 2019 (%)

(%) (%)
GDP growth rate 0.66 1.00 3.17 2.01 1.66

Inflation 1.13 1.43 1.60 2.27 1.95

CANADA

Unemployment 6.9 6.99 6.34 5.83 5.67

GDP growth rate 6.1 6.9 6.7 6.2 6.4

PHILIPPINES
Inflation 0.67 1.25 2.85 5.21 2.48

Unemployment 3.07 2.71 2.55 2.34 2.15

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 Fig.3
With that statistics, there is a clear observation of differences between Canada and
Philippines economic performance for the past 5 years. Philippines GDP growth rate accounts
with the average of 6.46% annul change, while Canada averages less than 2% with a drastic
decrease on the year 2018 and 2019. However, Canada has the lowest inflation rate as
compare to that of Philippines inflation rate. Yet, even Canada has the larger and diversified
economy, the country has a higher unemployment rate.

Does the statistics mean that Philippines is better as compare to Canada? Yes, maybe
for some perspectives, but not as a whole. Philippines might outrun Canada in terms of the
growth of economy as the data provided. However, these were only indicators of growth but
not involving the much broader variables of economic development, like the human
development index (HDI) as the most accurate measurement of development.

Fig.4 The Human Development Index (HDI) comparison

COUNTRY HDI HDI VARIABLES
RANK
Life Expected Mean Years GNI per
Expectancy Years of of Schooling capita PPP
(years) Schooling (years) (US dollars)
(years)
CANADA 16 82.4 16.2 13.4 48,527
PHILIPPINES 107 71.2 13.1 9.4 9,778
Fig.4

Economic growth is just one of the fundamental indicators of economic development. It

doesn’t mean that a country having a high growth in economy can already be considered
developed. In the case of Philippines, the country is characterized with an enormous gradual
economic growth, but on the other variables of development is on the lowest status.
Remember, Canada is already on the stage 5 of development and having a slow economic
growth can be considered as a normal trend as its economic status is on the state of
stabilization after the century of drastic growth on its economy.

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 Over all, Philippines still has a very long way for achieving the developed country status.
According to Rostow’s stages of development, Philippines is still on the stage 2 (Pre-take off)
going through a shift from heavy agricultural economy to a more industrialized in state.

Super Economy on Crisis

Like any other nations of the world, both developed and not, Canada behind its
economic might endures some major economic crisis in present and the worst is yet to come.
Despite of its abundant economic strengths, weaknesses still able to create a hole on its
strong wall of economy.

Canada’s major exports like the oils and energy products goes to U.S, this depicts a
heavy dependence on the U.S economy. So, what if the U.S economy fails on a sudden
circumstances? This could be a big problem to where Canada going to dispose that 90% of
exports of oil. Although, Canada developed a strong international relation for trading activities,
its percentage of exports to U.S compare to other countries is not that huge. Also, energy
exports are weakened by inadequate supply pipelines to the coast and the United States.

While the present Canadian administration is now implementing a high selective

immigration policy, working population slowly decreasing. Plus, the trend of an aging
population still on its fast rate of increase in percentage. It will be not yet now, but soon the
country’s abundance of human resources will probably decline if the problem of demography
and tighter immigration policy will still on effect.

Exploitation of natural resources due to over reliance on it has already having an

adverse effect on the environment, including the decline of fish catch annually as well as forest
covers due to acid arain from factories, particularly on the Great Lakes region destroying
timber resources. Canada’s over depletion to its natural resources might be ended up the
same with what happened to numerous towns in U.S being abandoned, commonly known as
“ghost towns”. It often happens when the economic activity that supported the area has been
already depleted resulting to zero economic activity. Then, what if Canada’s heavy reliance to
its natural resources eventually depleted it? What would the new economic activity the country
will engage? But if there could be a new source of economic activity, is it as prime as the

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industries of extraction and production of natural resources? These questions could be a vital
focal point of economic discussions for Canada and to other nations as well with a heavy
reliance to its natural resources as the main source or economic growth.

European Economy Stays The Prime

Canada despite of being one of the most developed nation, U.S economy can be still a
little stronger. However, European economy still on its prime throughout the world. according
to the World Bank’s database, the GDP annual growth rate of the top 10 European countries
the belongs to the European Union (EU) is averaging 3.66%, which is higher than the 2% of
U.S and Canada. While Norway, although belongs to European continent is not a part of EU
ranks the 1st in the human development index (HDI).

It is not already surprising that European countries are on the top of the economic
growth and development ranking in the world, taking into consideration that Europe is the birth
place of industrial revolution and they are the first to shift its economic structure into a highly
industrialized economy.

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 CONCLUSION

Analysis to Canada’s economy is a vital work to do and to be discussed as it provides a

clear descriptions and narrative data to help describe how economic growth and development
can be attained. In-depth analysis to a country’s economy serves as an eye opener on the
complexity of economy from the smallest components and to the aggregate level of economy.

Although after finding how strong and highly developed the economy of Canada,
economic struggles still exist into effect, this will be experienced to all nations of the world to
both most developed countries (MDC’s) and least developed countries (LDC’s). Even Canada
is considered most developed comparing to other nations, there will still be nations in the world
that can be more developed as that of Canada.

Over all, Canada economic growth and attainment of development is a result of various
economic factors arranged in a free structural orientation that are mutually working together for
an efficient and effective contributions to the wholeness of its economy.

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