- Some economic analysts have blamed Prime Minister Justin Trudeau’s approach, which is deemed to be weak in terms of growth reforms.
- The government argues that historically-low unemployment rates show things are not as bad as they seem.
- Canada’s budgetary deficit is set to deepen in 2020 due to slowing economic growth.
The Canadian economy has wilted in the face of the U.S. trade war, weak oil prices, and rising borrowing costs. And now, the country is forecasted to reach 1.5 percent growth by the end of the year. Exports figures are expected to remain stagnant due to increasing protectionism among major economies, such as the United States and China.
Some economic analysts have blamed Prime Minister Justin Trudeau’s approach, which is deemed to be weak in terms of growth reforms. He has prioritized spending on the middle class to keep the economy humming. In a nutshell, he has implemented drastic tax cuts for the middle class and upped child benefits, but on the other hand, he has increased taxes for the country’s wealthiest 1 percent.
Critics have questioned the strategy and called for a more investment-focused plan. Investments slowed to 0.3% in 2018. Slashing corporate taxes is one way of stimulating investments. The strategy is already working in the United States. Finance Minister Bill Morneau has, however, dismissed the approach and said that such a move could lead to tens of billions in debt.
The country’s economy grew by 4 percent in 2017, but that has been attributed to the fiscal stimulus enacted in 2016. The government is in no position to make such a move right now.
Low Unemployment Rates, Not a Good Indicator
The unemployment rate in Canada is reported to have dropped to all-time lows, and the government has been harping the statistical indicator as a sign of things not being as bad as they seemingly are. However, analysts have poked holes in this argument by pointing out that the rosy figures are as a result of an aging workforce. Unemployment, by definition, means the number of people out of work that are looking for a job.
This does not include those in retirement. Over the past ten years, the number of people in the labor force has shrunk to about 65 percent, from 67.4 percent. The detail is believed to be a major contributing factor to low unemployment statistics.
Some regions, such as Western Canada, are on the brink of a major recession, and major corporations are closing down operations in the zone. Over 40 major businesses have moved from the region in the past one and a half years, and more are joining the exodus. According to a recent survey by Angus Reid Institute, Albertans are the most anxious about the country’s economy improving.
A Bleak 2020 Outlook
Canada’s budgetary deficit is set to deepen in 2020 due to slowing economic growth. Existential risks are heightened by growing international disputes, rising unemployment, and low income among the citizenry. These elements subsequently reduce spending and the total amount of revenue that the government can collect.
Canada’s Parliamentary Budget Office has already sounded the alarm over this, and said that the deficit is likely to be, on average, about $1.6 billion higher over the next couple of years. GDP growth is estimated to reach just 1.7 percent in 2020. It is predicted to decline to 1.6 percent in 2021.