Details and Analysis
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While post-recession data are not yet available, in March 2011 we analyzed how Canada’s Economy report card was affected by the recession.
- Read more and watch video
We also used OECD economic forecast data to project Canada’s Economy ranking in 2011. - Read more and watch video
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How has the economic recession affected the Economy rankings?
What a difference a year makes. Since the Conference Board began international benchmarking in 1996, there has never been a year when the relative rankings have changed so dramatically:
- Ireland fell from the top of the class in last year’s report card to the bottom this year.
Ireland is reeling from the global economic crisis and a meltdown in its domestic property market and construction sector. The Irish economy contracted by 2.7 per cent in 2008, labour productivity and employment fell, and foreign direct investment—the main stimulus for Ireland’s economic miracle of the past decade—evaporated. Ireland became the first EU country to fall into recession in 2008. Ireland’s fall from grace, however, should not detract from the real gains that it has made in its standard of living. It is still the third wealthiest country—as measured by income per capita—in our comparator group. - Finland fell from 6th spot to 15th.
Finland’s slide in late 2008 was sharper and steeper than even during its early 1990s recession. Because Finland depends heavily on exports for its economic strength, the drop off in export markets at the end of 2008—particularly Russian exports due to a decline in Russian oil and gas revenues—caused Finland’s industrial output to decline 16 per cent between December 2007 and December 2008. - Norway moved into 1st position.
Norway continues to lead the class in income per capita—nearly $9,200 above that of Canada—and it weathered economic recession better than most of its peers in 2008. It was the only country to receive an “A” grade for employment growth in 2008, and it tied for 2nd place on GDP growth.
How did the financial crisis and economic recession affect Canada’s report card?
Like all countries, Canada has been affected by the worldwide downturn. Its income per capita fell in 2008, GDP growth was lower, employment growth was lower, and productivity growth was negative. It may seem, therefore, counterintuitive that Canada remained in 11th spot in 2008 with its “B” grade. The reason is that the global economic crisis is having a worse effect on most of Canada’s peers, so Canada’s relative position did not change.
Is Canada still in the gifted class?
Certainly Canada is still in the gifted class among nations. While the financial crisis and recession have had a negative effect on Canada and its 16 peer countries, they remain among the wealthiest in the world.
Among its peers, however, Canada’s 11th-place ranking means that it sits near the back of the class. Canada’s overall “B” in Economy masks its “C” grades on six of the individual indicators—income per capita, labour productivity growth, unemployment, employment growth, inward foreign direct investment (FDI), and outward FDI. Canada ends up with an overall “B” because its generally high “C”s, “A” on inflation, and “B” on GDP growth pull up its grade relative to peer countries with more uneven scores.
Is Canada’s performance slipping?
The 1970s began with Canada in a remarkably positive position. Canadian living standards were high, and the pronounced rise in economic growth and productivity throughout the 1950s and 1960s meant governments had the fiscal room to spend on widening Canada’s social safety net. At the 1967 World’s Fair in Montréal, it really seemed as if Sir Wilfred Laurier’s 1904 prediction that “the 20th century belongs to Canada” was coming true.
Alas, his prediction did not come to pass. Canada’s overall economic performance has since deteriorated relative to its peers. While Canada has made progress on several issues that vexed the economy in the past (government deficits and debt, double-digit inflation, and persistently high unemployment), Canada’s overall economic performance slipped from a “B” grade in the 1970s and 1980s to a “C” in the 1990s and most of the 2000s.
What should Canada do to improve its economic performance?
Although the current global economic recession will pass, we cannot take for granted that Canada will come through the recession better than its peers. Canada was not a star economic performer overall going into the recession, and its idling in 11th spot does not suggest that Canada will suddenly leap to the top of the ranking. For example, although most peer countries experienced a drop in labour productivity in 2008, Canada’s labour productivity growth has been lower than that of the top countries for many decades, hurting its international competitiveness. The Conference Board has long pointed out that improving the fundamentals—like productivity—is the only sustainable way to reduce the performance gap between Canada and other countries. Now, more than ever, the fundamentals matter.