Canada OECD Economic Survey 2023 Presentation

The economy has fully recovered from the COVID shock

Source: OECD Economic Outlook (database).

Unemployment has reached new lows

Unemployment rate

Source: OECD Economic Outlook (database).

Inflation is falling but remains high

Headline consumer prices, annual increase, %

Note: The Bank of Canada aims to keep inflation close to the 2% midpoint of a control range from 1 to 3% over the medium term.

Source: OECD (2022), Main Economic Indicators (database).

The cost of living has increased

Consumer price index, index Q1 2019 = 100

Source: OECD Economic Outlook database.

Economic growth is expected to rebound

Note: Shaded area indicates projections.

Source: OECD Economic Outlook 112 (database), updated.

The economic outlook has improved

Macroeconomic projections

Note: The table shows annual growth rates unless otherwise specified.

Source: OECD Economic Outlook 112 and OECD calculations.

Public debt reduction is underway

Public debt, % of GDP

Note: Data for 2022 are estimates. Gross debt includes general government liabilities in the form of currency and deposits; debt securities, loans; insurance, pensions and standardised guarantee schemes, and other accounts payable. Net debt subtracts financial assets from gross debt.

Source: OECD Economic Outlook 112 (database).

The housing market has softened

Real house prices

Source: OECD Economic Outlook database.

Reforms will bring down childcare costs

Median monthly childcare fees, major cities

Note: the childcare fees are based on a survey of households across 37 cities in Canada. This chart shows the results for the major cities of the four most populous provinces. The policy target for 2022 is for a 50% reduction in the 2019 childcare costs by end 2022. The "final policy goal” is based on the stated policy goal of CAD 10 per day (it assumes 20 days childcare per month).

Source: Centre for Policy Alternatives.

BOOSTING PRODUCTIVITY

Productivity growth is key to boost living standards

Source: OECD Economic Outlook database.

The investment performance can be improved

Real private non-residential investment

Source: OECD Economic Outlook database.

Removing internal trade barriers would boost growth

Deloitte (2021) Remove non-geographic trade barriers

(Canada)

(Ontario) IMF (2019) Remove non-geographic trade barriers

Albrecht and Tombe (2019) Remove trade costs unrelated to distance

Bank of Canada (2017) 10% reduction in trade barriers

over 3 years

Note: Estimated impacts are on Canada’s real GDP unless otherwise specified.

Sources: See Table 1.9 in the 2023 OECD Economic Survey of Canada.

TRANSITIONING TO A GREEN ECONOMY

Canada has ambitious GHG emissions targets

GHG emissions

Note: The solid blue line shows historical GHG emissions. The dotted line shows the emissions reductions required to meet 2030 and 2050 targets along an indicative pathway. The green line shows emissions projections by Environment and Climate Change Canada.

Source: Calculations based on OECD (2022), Environment Statistics (database); Climate Action Tracker; and ECCC.

Reaching net zero will be challenging

Total GHG emissions per unit of output, 2020 or latest

Note: Emissions data exclude emissions from land use, land use change and forestry (LULUCF). Units of GDP are given in USD, 2015 PPP.

Source: OECD Environment Statistics (database); OECD Economic Outlook (database).

Barriers to electricity trade are significant

Note: The chart shows average prices, including taxes, on 1 April 2022.

All sectors will have to contribute to the net zero effort

GHG emissions

Mt CO2 equivalent

Source: Environment and Climate Change Canada.

Targeted electric vehicle support

is key

Electric vehicle (EV) sales share, %

Note: EVs include battery electric vehicles (BEVs) and plug-in hybrid electric vehicles (PHEVs). The graph shows the EV share of new vehicle sales.

Source: IEA (2022), Global EV Data Explorer, IEA, Paris.

Emissions pricing helps foster low-cost abatement

Effective carbon rates in 2021

Note: Effective carbon rate is the price per tonne of CO2-equivalent and reflects explicit carbon prices, fuel excise and fossil fuel subsidies.

Source: OECD Centre for Tax Policy and Administration.

Tighter energy standards and retrofitting can reduce emissions from buildings

Carbon intensity of housing, 2019

Note: The countries presented in the graph are selected based on heating degree days – the number of days where the average temperature falls below the level at which residents typically turn on heating.

Source: OECD (2021), Brick by Brick: Building Better Housing Policies, OECD Publishing, Paris.

Flood insurance should be more widely available

Note: The chart shows the share of economic losses insured based on the midpoint of two estimates: the share of total losses that were insured, and the average of the share of insured losses across each individual event.

Source: OECD calculations based on data provided by Swiss Re sigma and PCS. Reported economic losses are included only for events for which an insured loss estimate is also available.

Main recommendations on monetary and fiscal policy

• Stand ready to raise interest rates further if needed to tame inflation.

• Maintain a close watch on housing debt.

• Ensure that fiscal policy continues to work in the same direction as monetary policy by tempering excess demand.

• Maintain a credible medium-term plan for lowering federal government debt. This should include the detailing of spending efficiency plans.

Main recommendations to lift long-term growth

Accelerate reduction in internal barriers to trade, including through widening the scope and powers of the Canadian Free Trade Agreement.

• Consider paring back foreign ownership restrictions in network sectors including telecommunications.

Strengthen regulation to prevent anti-competitive behaviour by large digital enterprises (“ex ante” regulation).

Main recommendations on social policy

• Better target provincial temporary support to households most in need of relief on living costs.

• Monitor and, where necessary, support the provinces’ and territories’ delivery of lower cost childcare and the creation of additional childcare spaces.

• Support self-determination among Indigenous peoples through further transfer of powers to communities.

Main recommendations for transitioning to a net zero economy

• Follow through with planned carbon price increases and tightening of benchmarks in emissions trading schemes.

• Expand emissions pricing to cover more sources of GHG emissions.

• Provinces should plan transitions to market-based electricity pricing.

• Introduce default time-of-use electricity pricing for residential customers in provincial electricity markets.

Main recommendations for transitioning to a net zero economy (continued)

• Continue support for carbon capture investments while consolidating subsidies as technologies improve.

• Maintain targeted electric vehicle support while EV markets are maturing.

• To improve public transport viability, provinces and cities should increase use of road user charging and pare back constraints on housing supply.

• Encourage fast provincial adoption of federal building energy codes.

• Target home retrofitting support to middle and lower-income households.

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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