Why Canada’s Economy is Falling Behind America’s: From Richer Than Montana to Poorer Than Alabama
October 1, 2024
Canada’s economy, once slightly richer than Montana in 2019, has now fallen behind to be just poorer than Alabama. This significant shift highlights the growing economic disparity between Canada and the United States.
Several factors contribute to this decline. One major issue is Canada’s lagging productivity. Despite solid headline growth in recent years, Canada’s real GDP per capita has been deteriorating, especially since the 2014-15 oil price shock and the pandemic. The country’s economic growth has not kept pace with its rapidly growing population, leading to a lower standard of living compared to its wealthy peers.
Additionally, Canada’s economic performance has been hampered by insufficient growth in key sectors. The housing market, which powered much of the recovery post-pandemic, has seen a significant decline. Exports have also receded due to supply chain issues, particularly in the motor vehicle sector.
The Canadian government is aware of these challenges and has taken steps to address them. Prime Minister Justin Trudeau has enlisted former Bank of Canada governor Mark Carney to advise on boosting economic growth. Treasury Board President Anita Anand has launched a working group to study the country’s productivity issues and find ways to enhance economic output.
Despite these efforts, the gap between Canada and the U.S. continues to widen. The U.S. has enjoyed faster growth, with its GDP per capita rising significantly over the past decade. This disparity underscores the need for Canada to implement effective strategies to boost productivity and economic growth.
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