Global Business Outlook: Canadian Economy Ranks High

While the global recession is still a major economic factor in many countries, the Canadian economy is rebounding very well. A stable banking sector combined with lower employment, have contributed to Canada's recent rise in global economic standings.

According to annual rankings by the Conference Board of Canada, the Canadian economy ranked 11th of 17 developed countries in 2008. However, based on current forecasts by the Organization for Economic Cooperation and Development (OECD), the country's ranking is expected to catapult to 5th place in 2010. The OECD's forecast for growth, unemployment, and various other economic factors revealed that Canada is expected to rebound from the global recession at a rate that far exceeds many other developed countries.

Both the United States and Belgium are also expected to rise in global economic rankings. However, Switzerland, Britain, and the Netherlands are expected to fall. Norway was ranked in first place in 2008 and is predicted to remain in first place through 2010. This high ranking is attributed to the country's large petroleum sector as well as its resilient economy. At the bottom end of the scale is Ireland whose 17th place economic ranking is expected to continue into 2010.

Although Bank of Canada Governor Mark Carney recently announced that the recession is over, many unemployed Canadians would disagree. On the other hand, consumer confidence has displayed an upward trend since the beginning of 2009. As well, investment portfolios have begun to recover, housing prices have risen, and the key lending rate in Canada is at an historic low.

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New Brunswick's Less Optimistic Tax Savings

Much fanfare accompanied the New Brunswick government's tax cuts that took effect July 1 of this year. After the dust settled, it appears that less money is returning to the province's residents than was originally advertised.

Premier Shawn Graham promised a "pleasant surprise" to residents on their pay stubs beginning in July. While there have been some changes for the better, they are far below what the premier promised. According to leading tax analysts, the tax cuts are as much as 25 per cent less than promised.

While the tax cuts will verify based on individual income, many residents have said that the net difference is so negligible as to not have any effect on their habits.

The provincial Department of Finance does admit that the figures quoted by the premier included a reduction from an old Progressive Conservative government tax break that takes effect every January 1, beginning back in 2001.

The current government's 2009 budget included numerous budget cuts to various departments and a two year wage freeze for public sector employees. As both these items were unpopular, though necessary in order to tackle a large provincial budget deficit, it was hoped that the tax break would soften the blow. The budget included the first part of an economic stimulus package by adjusting both personal and corporate tax rates. By 2012, the province will have two personal income tax brackets. The maximum tax will be 12 per cent. In the meantime, residents feel that they have not been adequately compensated for the budget cuts.

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Canadian economy not to be outdone – Part II

At the G8 summit, both the U.S. President and British Prime Minister, among others called for additional economic stimuli on a global scale, despite the US$2 trillion already expended as they feel it has yet to push demand high enough. On the contrary, Canadian PM Stephen Harper urged other leaders to focus on ensuring proper delivery of those stimuli already promised. "That's been our focus in Canada and I would encourage the same priority elsewhere," he told the press.

Canada's stimulus package consists of $46 billion over 2 years, poised for creating more jobs and igniting consumer demand. The amount is expected to increase to almost $80 billion once the provincial and territorial aspects kick in. PM Harper claims 80% of the planned federal funds have already been committed. In addition, Bank of Canada cut its key lending rate from 4.5% in December 2007 to its present level of .25%

Analysts see the present Canadian stimulus package taking effect in the next few months and see no need for any new stimulus monies. There is always a lag from the announcement of the stimulus package until effects are seen from it, must like that of lowering interest rates, according to Craig Wright, chief economist at Royal Bank of Canada. "Staying the course is probably the prudent path right now," he says.

Stefane Marion, chief economist at National Bank Financial, agrees that we must wait for the money to start working in the economy. Canada's financial system in general is in better shape than those of most other G8 countries and did not have the same real estate collapse that they did. He also sees production rising this year as indicated by purchasing managers and other key factors.

Furthermore, the IMF advises countries to continue to support their economies in some way until the recovery takes hold (predicted next year); while they should also plan to reduce deficits in their budgets caused by spending to combat the recession.
Canada, along with the IMF in general also agreed to make emergency capital available for borrowing, for countries that may need it soon.

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