Consumer spending and housing activity are proving more resilient than expected, while the slow pace of global growth and ongoing competitiveness challenges have reduced demand for our exports and weighed on manufacturing production. Businesses also remain cautious when it comes to hiring and investing.
Against this backdrop, Canada’s economy is on track to expand by 1.7% in 2013, matching the previous year’s sluggish pace. The economy is projected to grow by 2.3% in 2014 and strengthen moderately to 2.5% in 2015.
“A reinvigorated U.S. (and global) economy should translate into better prospects for Canada’s export sector in 2014,” said Perrin Beatty, president and CEO of the Canadian Chamber of Commerce. He adds, “To reap the full benefits of an improving global outlook, we need to strengthen our competitiveness, tap new markets and secure and grow our involvement in global supply chains.”
Canada’s share of the U.S. import market has declined steadily since 2000. Much of the loss in competitiveness reflects the strength of the Canadian dollar, but Canada’s weak productivity performance has also played a significant role.
Government can play an instrumental role in strengthening competitiveness by improving the policy setting—for example, reducing the regulatory burden, cutting high marginal personal income tax rates, shifting away from taxing income and profits to taxing consumption, investing in infrastructure and education, and championing unencumbered global trade and investment—however, the onus is on businesses to craft a sustainable competitive advantage to capitalize on these opportunities.