Canada may have lost its bragging rights when it comes to being one of the best economic performers of big industrial nations.
According to a report issued by the Organization for Economic Co-operation and Development (OECD) on Monday, the data for Canada “continues to point to weak growth,” while the economies in the United States and Japan seem to be “firming.” Germany, another Group of Seven nation, is also expected to see more growth than they have over the past few years; and definitely more than Canada.
While we’ve been priding ourselves on the fact that Canada was one of the countries to see the strongest performance and growth during and immediately after the recession, last year was a tough one for us, especially the last half. Since last summer our GDP has slowed to a crawl, climbing only 0.7 per cent in the third quarter, and slowing even further to 0.6 per cent in the last quarter of 2012.
And in fact, the U.S. is starting to gain on us in terms of GDP growth. Economist Benjamin Tal has pointed out that the U.S. saw more growth last year than we did; with 2.2 per cent growth and 1.8 per cent growth, respectively.
After a meeting Jim Flaherty had with several key economists on Friday, we also learned that GDP growth this year was only expected to be 1.7 per cent.
Tal says he’s not surprised, and Canadians shouldn’t be either.
“Canada is not leading anymore,” he says. “Canada is entering this period in which we will underperform,” explaining that both consumer growth and housing have slowed. Those were the two main drivers we had been counting on during the dark days of the recession, and for the past several years afterwards too.
One reason for the lack of growth, says NDP critic Peggy Nash, is because the government isn’t investing money where it’s needed – on things such as roads, bridges, and improvements to public transit systems. Not only is ignoring these things hurting economic growth, she says, but now is also the time for the government to be putting money into these things, while interest rates are so low.
“Obviously people expect us to be prudent with tax dollars,” she says. “But we’ll never find a better time and a better price to leverage federal dollars for things like infrastructure. Not only is the lack of infrastructure hurting the economy now, but why make these investments later when interest rates are higher and it costs you more money?”
But, that’s not likely to happen. Finance Minister Jim Flaherty has already said that his new budget, to be unveiled on March 26, focuses on bringing the budget back into balance by 2015-2016, and for that it will mean more spending cuts and closing tax loopholes, not spending even more.
And for the most part, economists agree, saying that we’re certainly not in dire enough shape to warrant more stimulus. Tal also says that reports such as this need to be considered with everything taken into perspective. Countries such as the U.S. and Germany still have losses that they need to recoup, while Canada has already recovered everything it lost during the recession.
The U.S., he says, still has yet to get all the jobs back into the economy, while Canada hasn’t only done that but also added 50,000 more. And, he nods towards Italy and Spain, countries that are still deep in the throws of their own recession, and asks that people consider how strong our growth still is when compared with other countries.
“Those leading indicators tell you where you are going, they don’t tell you the level you are at,” he says. “We’re operating at a relatively high level, while the U.S. and other places, they are operating at very low levels.”
