According to statistics from the World Bank, Canada has the 14th largest economy in the world based on annual GDP (Pomfret, 2013). The country’s immense wealth is evident from its membership in the G7 summit and the Organization for Economic Co-operation and Development (OECD).
The services industry is the main sector that contributes greatly to its GDP. According to government statistics, the services industry accounts for approximately 75% of jobs in the labor market. Other industries that are critical to Canada’s economic development include the aviation, automobile, and manufacturing industries. Canada has a GDP of $1.827 trillion, which represents a growth rate of 3.6% from last year’s GDP (Data, 2014).
The rate of unemployment has decreased significantly. According to studies conducted in 2010, the population that lives below the poverty line is 9.4% (Pomfret, 2013). Canada has entered into several free trade agreements that account for its involvement in international trade.
Canada’s trade relationship with the U.S. has been a major factor in the economic growth that the country has experienced in the past decade. Also, several free trade agreements with other countries have boosted their revenue from international trade.
Gross Domestic Product (GDP)
The growth rate of a country’s GDP is an important economic indicator that shows the potential of the economy to produce goods and services (Wesson, 2007). According to statistics from the World Bank, Canada’s GDP is $1.827 trillion and represents approximately 2.94 percent of the global economy (Data, 2014).
The country has performed well for the last five decades because the average GDP is $558.44 billion (Pomfret, 2013). The country attained the lowest GDP in 1961 and the highest in 2013. 30% of the GDP comes from goods-producing industries while the other 70% comes from the services industry (Pomfret, 2013).
Key economic industries
Canada has several industrial sectors that account for its high GDP. They include retail trade, public administration, health care, manufacturing, information finance and insurance, energy, utilities, accommodation, agriculture, transportation, and international trade.
The services industry
The services industry is the largest and most important component of Canada’s economy that accounts for approximately 80% of the country’s GDP (Pomfret, 2013). Statistics reveal that the industry accounts for approximately 75% of jobs in the country (Pomfret, 2013). It has many subsectors that include the retail industry, business services, education, health, and technology. The retail industry is the largest in the services sectors and is responsible for about 12% of all job opportunities (Pomfret, 2013).
This industry is characterized by shopping malls and chain stores that are distributed across the country. Retail stores such as Wal-Mart are major players in the retail industry. Urban migration in Canada has been largely attributed to the rapid growth of this industry. The business services are the second largest subsector and comprise industries that are mainly found in urban areas such as real estate and financial services (Wesson, 2007).
The sector employs a considerable number of people and has a significant impact on the country’s GDP. The education and health sectors are critical to the economy because they are among the largest sectors in terms of economic contribution (Pomfret, 2013). They have experienced rapid growth in the last decade due to financial support from the government.
On the other hand, both sectors have experienced several challenges that have emanated from rapid growth and inadequate funding. Both sectors have experienced an increased demand for services. The technology and entrainment sectors are also important economic sectors that have grown rapidly in the last decade. Finally, tourism has grown significantly due to an increase in the number of tourists especially from China and the United States.
The manufacturing industry is an important component of Canada’s economy that accounts for approximately 10% of annual GDP (Pomfret, 2013). The pattern of Canada’s economic development in the past five decades involved a succession of changes in the industrial, manufacturing, and services sectors.
anada’s manufacturing industry accounted for 15.6% of the country’s GDP in 2005. Unlike other developed countries, Canada has not experienced any significant decline in its manufacturing industry. The industry recorded its lowest period during the global financial crisis that lasted from 2007 to 2010. In 2010, the manufacturing industry was responsible for 13% of the country’s GDP. Several American and Japanese automobile manufacturers are concentrated around Central Canada.
Manufacturers invest in Canada because of its low labor costs and a highly developed education system (Pomfret, 2013). In addition, its health care system is highly developed and thus makes it easy for foreign companies to invest because the government caters for health insurance costs (Wesson, 2007). Majority of the manufacturing firms in Canada are constituents of companies situated in the United States.
Canada has numerous energy resources that generate huge revenues from the export of energy products to different countries. For instance, its revenue for energy exportation in 2009 accounted for 2.9 percent of the country’s GDP (Pomfret, 2013). Canada has vast oil and gas resources. The Athabasca Oil Sands has been identified as the third largest oil reserves in the world making Canada a major exporter of energy products (Wesson, 2007).
A highly developed energy sector has facilitated the development of numerous industries. For instance, Quebec is home to several aluminum industries. As the 5th largest producer of energy in the world, Canada supplies products such as petroleum, coal, natural gas, and hydroelectricity to various countries (Wesson, 2007).
Its supply accounts for 6% of the net global energy supply (Pomfret, 2013). Another resource that boosts the Canadian sectors is uranium that accounts for more than 35 % of the global supply (Pomfret, 2013). The largest portion of Canada’s energy products and services are exported to the U.S. The government also invests in renewable energy sources such as solar energy and wind power. The country benefits from its vast energy resources because of stringent energy conservation policies as well as federal and provincial regulation.
Canada is among the top ten exporters of agricultural products in the world. In particular, it specializes in supplying wheat, dairy products, and other grains to the United States and Asia. In the past decade, the agricultural sector has experienced numerous challenges that caused its low contribution to the country’s GDP. In order to mitigate the problem, the government developed a program to subsidize certain products and services.
The largest agricultural production sectors include horticulture, dairy, poultry, and eggs, grains, and oilseeds, as well as livestock (Pomfret, 2013). These sectors generate revenue both from domestic and foreign trade. The agricultural sector contributes significantly to federal and provincial economies because of its role in job creation. The sector employs approximately 2.1 million people in its different subsectors.
The performance of Canada’s economy can be studied by considering certain economic indicators that include the rate of unemployment, the rate of inflation, and the rate of GDP growth. In the last 10 months, the rate of unemployment has decreased slightly to 6.5 percent (Canada Unemployment Rate, 2014).
Fig 1: changes in rate of employment from Jan 2014-Oct 2014 (Canada Unemployment Rate, 2014).
Unemployment reached its highest point in 1982 when the economy was experiencing harsh times (Wesson, 2007). Since then, it has decreased gradually as the economy recovered. The decline has been attributed to increasing the availability of self-employment opportunities (Canada Unemployment Rate, 2014).
In August, the rate of inflation was 2.1 percent due to the high costs of housing, high food prices, and high costs of transportation. Also, an increase in the price of household equipment and operations contributed to the rate of inflation. In the past year, the rate of inflation has changed considerably. In the second quarter of 2014, the GDP grew by 3.6%. During the close of 2013, the GDP per capita was estimated at $51,989.
Canada has a very strong trading relationship with the United States that has been an important factor in its economic development (Wesson, 2007). The United States is the dominant trading partner in terms of exports, imports, and the establishment of manufacturing facilities in the country. For instance, in 2011, approximately 70% of all Canadian exports went to the U.S. On the other hand, more than 60% of the United States exports went to Canada (Pomfret, 2013).
The trading relationship has strengthened over the years with numerous United States’ manufacturing companies building production plants in Canada. Canada has signed free trade agreements with many countries that facilitate its operations in international trade.
For instance, free trade agreements exist between Canada and countries such as the United States, Costa Rica, Chile, Israel, and North Jordan, Columbia, Mexico (Pomfret, 2013). Currently, the government is in the process of conducting dialogues with countries such as South Korea, Singapore, Ukraine, Morocco, and Japan for the establishment of more free trade agreements.
Canada has the 14th largest economy in the world largely due to its well-developed energy, manufacturing, and services industries. Its economy can be presented using several economic indicators such as its GDP, rate of unemployment, and rate of inflation. Canada has a GDP of $1.827 trillion, which represents a growth rate of 3.6% from the year 2013. The rate of unemployment has been on the decline in the past 10 months.
The population that lives below the poverty line is 9.4%, according to studies conducted in 2008. A third of the GDP comes from goods-producing industries such as manufacturing and agriculture while two-thirds comes from the services industry. The services industry is the largest and most important economic sector in Canada that accounts for approximately 80% of the country’s GDP. Statistics reveal that the sector employs more than 75% of Canadian workers in different businesses.
The sector has many subsectors that include the retail industry, business services, education, health, entertainment, and technology. The manufacturing industry accounts for approximately 10% of Canada’s GDP and 13% of its workforce. The largest agricultural production sectors include horticulture, dairy, grains, and livestock. Free trade agreements with several countries account for a large percentage of revenue from international trade.
Canada Unemployment Rate. (2014). Web.
Data: Canada. (2014). Web.
Pomfret, R. (2013). The Economic Development of Canada. New York: Routledge.
Wesson, T. J. (2007). Canada and the New World Economic Order: Strategic Briefings for Canadian Enterprises. New York: Captus Press.