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OECD ECONOMIC SURVEY OF CANADA 2021

Economic recovery from COVID-19, strengthening well-being

11 March 2021, Paris

@OECDeconomy @OECD

http://www.oecd.org/economy/canada-economic-snapshot/

Canada has managed the COVID crisis relatively well COVID-19 cumulative deaths per million inhabitants, 7-day moving average 1200

Canada

OECD

1000 800 600 400 200 0 Mar-20

Apr-20

May-20

Jun-20

Jul-20

Source: Our World in Data, as of 2 March 2021.

Aug-20

Sep-20

Oct-20

Nov-20 Dec-20

Jan-21

Feb-21 Mar-21 2

As elsewhere, recovery in output is taking time Real GDP, index Q4 2019 = 100 102

Canada

United States

OECD

100 98 96 94 92 90 88 86

2019

2020 Note: The last quarter is an estimate. Source: OECD Economic Outlook database.

2021

Recovery is uneven Monthly GDP (volumes) in selected service sectors and whole economy Index, December 2019 = 100 110 100 90 80

Whole economy

Wholesale and retail trade

Arts, entertainment and recreation

Accommodation and food services

40 30

Jan-19

Mar-19

May-19

Jul-19

Sep-19

Nov-19

Jan-20

Mar-20

May-20

Jul-20

Sep-20

Nov-20

Source: Statistics Canada. 4

Young people have suffered the largest job losses, especially women Decline in the rate of employment, January 2020 to January 2021 % points 12

Women

Men

10 8 6 4 2 0

15-64 year olds

15-24 year-olds

Total active population

Youth

Source: Statistics Canada.

Ensuring a solid and sustainable recovery

Fiscal support has been substantial General government deficit, % of GDP 20

2020

2019

15 10 5 0

-10

NOR DNK SWE KOR CHE LVA LUX DEU NLD EST PRT IRL FIN CZE HUN SVK SVN EU22 LTU NZL GRC FRA AUT JPN CAN ITA POL BEL OECD ESP AUS ISR ISL USA GBR

-5

Source: OECD Economic Outlook 108 database. For Canada the published figures from national accounts data are shown.

Public debt has increased Gross public debt, % of GDP 160

2020

2019

140 120 100 80 60 40 20 0

AUS

EU22

CAN

OECD

Source: OECD Economic Outlook108 database; and Statistics Canada.

USA

GBR

Monetary policy has been supporting the economy Central Banks’ total assets % of GDP 140

2007

2019

2020

120 100 80 60 40 20 0

Bank of Canada

Federal Reserve

Source: OECD Economic Outlook database; and Bank of Canada.

ECB

Bank of Japan

House price increases have picked up Real house prices, index Q1 2010 = 100 170 Canada

160

Australia

United States

OECD

150 140 130 120 110 100 90 80

2010

2011

2012

2013

Source: OECD Economic Outlook database.

2014

2015

2016

2017

2018

2019

2020

Household debt remains high Household indebtedness ratio, % of disposable income 2020 Q3 or latest 250

200

150

100

Source: OECD, National Accounts - Household Dashboard database.

DNK

NOR

NLD

SWE

AUS

CAN

FIN

GBR

FRA

IRL

PRT

BEL

JPN

ESP

USA

GRC

DEU

AUT

ITA

CZE

CHL

POL

SVN

Financial vulnerabilities have risen Non-financial investment-grade corporate bonds, % of GDP 25

Very low grade

Low grade

High grade

2007

2019

Apr-2020

Note: High grade: AA AAA, AA, A rated bonds; Low grade: BBB+, BBB, BBB- ; Very low grade: BB, B, CCC-D. Source: Calculations based on data from Bank of Canada (2020), Financial System Review 2020.

Main recommendations  Continue fiscal support until the economic recovery is well underway. Adjust crisis-related support as the recovery progresses to ensure assistance focuses on jobs and viable companies.  Ensure a credible medium-term plan for controlling and lowering federal government debt.  After the pandemic subsides, debt stabilisation and the accommodation of additional spending commitments should be achieved through efficiency gains in public spending, where feasible. Should substantial additional revenues be required, prioritise an increase in the rate of the federal goods and services tax.  Accommodative monetary policy should be maintained to help economic recovery.  Maintain a close watch on housing and corporate debt and, if needs be, tighten macroprudential rules.

Strengthening and greening the recovery

Broadband access is uneven Share of households with access to broadband at more than 100 Mbps %, 2018 % 90 80 70 60 50 40 30 20 10 0

Canada

Rural communities

Source: CRTC (2019), CMR 2019-Retail Fixed Internet Sector and Broadband Availability.

First Nations reserves

Insolvency processes can be improved Scores in selected aspects of insolvency schemes: higher scores indicate worse systems 3.0

Personal costs to failed entrepreneurs

Lack of prevention and streamlining

Barriers to restructuring

2.5 2.0 1.5 1.0

0.0

GBR RUS FRA JPN USA CHE DNK CHL DEU ESP FIN IRL ISR SVN CRI NZL PRT AUT GRC SVK ITA KOR MEX AUS LVA POL TUR NOR SWE CAN LTU BEL CZE NLD HUN EST

0.5

Source: OECD (2017), Confronting the Zombies: Insolvency and Financial Reform, Corporate Restructuring and Productivity Growth.

Greenhouse gas emissions have yet to begin a substantive downward path Total greenhouse gas emissions, megatons of carbon dioxide equivalent 800

Emissions under policies implemented as of September 2019

700 600

2030 Target: 30% emission reduction on level in 2005

500 400 300 200 100 0

Net zero 1990

2000

2010

Source: Environment and Climate Change Canada.

2020

2030

2040

2050

Canada has scope to make housing more energy efficient CO2 emissions from fuel combustion, including electricity and heat, from the residential sector, 2018 tons CO2 per capita 3.00 2.75 2.50 2.25 2.00 1.75 1.50 1.25 1.00 0.75 0.50 0.00

USA EST AUS CZE POL DEU CAN IRL LUX OECD BEL KOR NLD JPN GBR GRC FIN ISR AUT HUN DNK ITA CHE SVN SVK FRA ESP TUR LVA PRT CHL LTU SWE NZL MEX COL NOR ISL

0.25

Source: IEA (2020), CO2 Emissions from Fuel Combustion, 2020 Edition.

Environmental taxation is comparatively low Revenues from environmental taxation, as % of GDP 2019 or latest available year 2.5

Energy

Transport

Pollution

2.0

1.5

1.0

0.5

0.0

United States

Canada

Australia

OECD (median)

EU 22 (median)

Source: OECD Environmental policy: Environmental policy instruments, OECD Environment Statistics (database).

Main recommendations  Follow through with the recent plan to accelerate the increases in carbon pricing and taxation through 2030 while protecting the poorest from the impact on their living standards.  Make greater use of taxation and charges to tackle environmental externalities, including from vehicle fuels, waste water treatment and solid waste disposal.  Augment the insolvency system with an early-warning mechanism and a pre-insolvency regime for businesses in difficulty.  Expedite the removal of non-tariff barriers to internal trade.  Reduce the cost and improve the quality of telecommunications services, including broadband to rural and remote communities.  Tackle money laundering via the property market by tightening property registration rules to prevent the creation of opaque business structures.

Increasing the well-being of Canadians

Improving well-being is key

Source: OECD (2020), How’s Life? 2020, Measuring Well-Being, OECD Publishing, Paris. 22

Social mobility is high Absolute social class mobility Percentage of 25-64 years old whose social class is higher or lower than that of their parents, 2002-14 % 80

Upward mobility

Downward mobility

70 60 50 40 30 20

Note: Social class is based on the nine European Socio-Economic Classification (ESEC) categories constructed based on occupation. Source: OECD (2018), A Broken Social Elevator? How to Promote Social Mobility.

OECD26

CAN

EST

KOR

SVN

USA

NLD

SVK

AUS

CZE

GBR

SWE

HUN

NOR

DNK

ISR

BEL

DEU

FIN

ISL

FRA

CHE

POL

IRL

ESP

PRT

ITA

Many elderly Canadians live in institutional long-term care Number of long-term care beds in institutions, 2019 or latest Per thousand population aged 65 and over

90 80 70 60 50 40 30 20

Source: OECD (2020), Health statistics database.

LUX

NLD

SWE

BEL

CHE

FIN

DEU

CAN

SVN

ISL

NZL

AUS

SVK

FRA

IRL

AUT

HUN

EST

NOR

ESP

GBR

OECD

DNK

LTU

CZE

USA

JPN

KOR

ITA

ISR

LVA

POL

Public insurance coverage for pharmaceuticals is incomplete Expenditure on retail pharmaceuticals¹, 2017 or nearest year %

100

Government/compulsory schemes

Voluntary health insurance schemes

Out-of-pocket

Other²

80 60 40

DEU FRA IRL USA JPN BEL SVK LUX NLD AUT GBR ITA ESP CZE OECD31 NOR CHE PRT FIN KOR GRC AUS SWE EST SVN HUN DNK LVA POL CAN ISL LTU

1. Includes medical non-durables. 2. "Other" includes financing from non-profit-schemes, enterprises and the rest of the world. Source: OECD Health at a Glance 2019, https://doi.org/10.1787/4dd50c09-en.

Combining work and family life is challenging % of earnings 120

Financial disincentive to enter employment with childcare costs, 2019 or latest available Whose partner earns the average wage

Whose partner earns 67% of the average wage

100 80 60 40

CHL KOR ESP EST SWE TUR ISR NOR GRC CZE LVA PRT ITA HUN LUX AUT NLD DEU OE… JPN POL ISL LTU USA SVK FIN FRA CHE BEL IRL AUS GBR SVN DNK NZL CAN

Note: Calculations refer to a couple with two children where the other parent works full-time at 67% of the average wage. Source: OECD (2020), Financial disincentive to enter employment with childcare costs (indicator).

More affordable housing is needed Social rental dwellings, as a % of the total housing stock, 2018 or nearest year % 40 35 30 25 20 15 10 5 0

NLD DNK AUT GBR FRA IRL ISL FIN KOR POL AUS NOR BEL NZL USA CAN DEU TUR LVA ESP EST LTU COL

Source: OECD, Housing Synthesis Report (forthcoming).

Indigenous peoples face acute disadvantage Indigenous levels as a percentage of non-Indigenous levels A. Life expectancy

B. Income

100

90 80

84 82

10 AUS

NZL

CAN

USA

MEX

CAN

Source: Adapted from OECD (2019), Linking Indigenous Communities to Regional Development.

USA

NZL

Main recommendations

 Develop a well-being framework including a dashboard of indicators for use in government decision making.  Use the well-being dashboard initially to identify policy challenges and to measure progress in outcomes.  Seek efficiency gains and reduced waiting times in health care through better patient prioritisation, improved co-ordination between primary-care providers and specialists, greater use of telemedicine and the reallocation of some tasks from physicians to nurses.  Increase support for high-quality institutional and home-based long-term care.  Shift more resources towards mental health and public health.  Follow through with the plan to negotiate with the provinces and territories the gradual adoption of universal drug coverage (“Pharmacare”).

Main recommendations (continued)  Boost childcare provision through increased subsidies of services, tougher quality control, and more support for families to pay for these services.  Improve housing supply by ensuring a competitive construction sector, reducing rent controls and relaxing strict zoning and land-use regulations and urban containment policies.  Put more resources into social housing and encourage alternative ownership arrangements.  Enhance self-determination among Indigenous peoples.  For Indigenous peoples, maintain the distinctions-based approach to policy, and ensure adequate funding to eliminate gaps with other Canadians.

For more information Disclaimers: The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law. This document and any map included herein are without prejudice to the status of or sovereignty over any territory, to the delimitation of international frontiers and boundaries and to the name of any territory, city or area.

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