Canada’s economy still earns a ‘B’ grade despite tumultuous 2008
July 7, 2009 by Manufacturing AUTOMATION
Amid the financial turmoil of 2008, Canada maintained its “B” grade in economic performance and its 11th place ranking among 17 of the wealthiest countries in the world, according to the Conference Board’s How Canada Performs benchmarking analysis.
Canada’s relative position did not change in 2008, despite rising unemployment, falling income per capita, slowing gross domestic product (GDP) growth, and declining labour productivity. Other countries were even harder hit by the global economic crisis.
“Since the Conference Board began international benchmarking in 1996, there has never been a year where the relative rankings changed so dramatically,” said Glen Hodgson, senior vice-president and chief economist. “Some of Canada’s peers suffered stunning reversals in 2008 – notably Ireland, which fell to last place.”
“Canada’s 11th place ranking means it remains near the back of the class among its peer countries. For example, Norway is the leading country in our analysis and it has an income per capita of nearly US$9,200 more than we do. We cannot take for granted that Canada will come through the recession better than its peers. Canada is still lagging on key indicators of sustainable economic growth.”
Canada’s “B” grade is based on its performance in eight economic indicators:
• Inflation – “A”
• GDP growth – “B”
• Income per capita – “C”
• Labour productivity growth – “C”
• Unemployment rate – “C”
• Employment growth – “C”
• Inward foreign direct investment (FDI) – “C”
• Outward FDI – “C”
Canada maintained an overall “B” grade – despite six “C”s – because an “A” on inflation, a “B” on GDP growth, and relatively high “C” scores pulled up its average grade compared to peer countries with more uneven scores. Canada also increased its share of global outward FDI relative to its share of global GDP, which bolstered its ranking.
Norway moved from third place in the economy domain in 2007 to first in 2008. Norway was the only country to receive an “A” grade for employment growth last year, and it tied the Netherlands for second place in GDP growth behind Australia.
Rankings for several countries changed dramatically between 2007 and 2008:
Ireland fell from first place to 17th – 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 FDI – the main stimulus for Ireland’s economic miracle of the past decade–evaporated. Ireland’s fall from grace, however, should not detract from the real gains that it has made in its standard of living. Ireland is still the third wealthiest country – as measured by income per capita–among the comparator countries.
Finland fell from sixth spot to 15th – Finland’s slide in late 2008 was steeper than during its early 1990s recession. Finland is heavily dependent on exports for its economic strength. The drop-off in exports – particularly to Russia, due to lower Russian oil and gas revenues – caused Finnish industrial output to decline by 16 per cent between December 2007 and December 2008.
How Canada Performs is the Conference Board’s annual benchmarking analysis, which the Board has conducted since 1996. The Economy is one of six domains in which Canada is compared to 16 other developed countries. Other domains – Health, Society, Innovation, Environment, and Education and Skills – will be updated later this year.