As Canada heads into 2015, analysts are trying to forecast what lies ahead for the world’s 11th biggest economy. Below we take a look at recent economic performance markers that could give us a fair indication on what to expect in 2015.
Free trade agreements
Canada has now concluded free trade agreements with more than half of the world’s economy, with a combined GDP of $41 trillion, giving a major boost to Canadian producers and manufacturers looking to compete globally.
The year 2014 saw Canada signing major free trade agreements with the European Union as well as South Korea. The government now plans to hold discussions with India, Japan and the Trans-Pacific Partnership group consisting of 12 nations.
The Canadian government also aims to reverse the negative export trend it has been experiencing, with the country’s share in global exports having declined from 4.5% to 2.5% over the last 15 years.
In February 2014, the average sale price of a detached Vancouver house reached a record high of $1,361,023. The average price of housing all across Canada in 2014 went up by 6.8%, as opposed to a 5.2% increase in 2013.
The main drivers behind the rising real estate prices are the low borrowing costs combined with a scarcity of small single-family houses in certain markets like Toronto.
According to the central bank, the price of Canadian houses was overvalued by as much as 30%. Real estate forecasters however believe that the price rise will level off in the near future.
Since 2010, the central bank of Canada has stuck to its 1% overnight interest rate which influences major economic drivers like mortgages and loans. The interest rate has been pegged at 1% for four years now in what is seen as an attempt to drive up the performance of the economy, and it is likely that the interest rate will remain the same in 2015 too.
Number of factory workers
The total number of factory workers in Canada in June last year was recorded at 1,710,900, the lowest since 1976. The decline has severely impeded Canada’s manufacturing abilities in a highly competitive international market.
However there was a notable improvement in labor numbers up until November last year, with reports indicating that about 41,000 factory jobs had been created between June and November 2014.
However, critics have argued that despite growing demand, Canadian industry does not quite have the capacity to manufacture unless significant investment is made. Canada has undergone severe loss of exporting potential and this has destroyed the “backbone of the economy” which would need a longer rebuilding phase to recover, says Stephen Poloz, Governor at the Bank of Canada.
A study by central bank revealed that Canadian manufacturers are expanding their production abroad instead of at home.
Even with unemployment rate hitting a six-year low of 6.6% in 2014, Canada’s labor markets will see some improvement in 2015. According to Bank of Canada Governor Stephen Poloz, there are 200,000 young people in the country who want to work or work more.
Poloz has urged Canada’s youth to take whatever work they could get regardless of whether it pays anything or not. His statement evoked much criticism from labor unions and youth groups, who believe that the Canadian government should work on improving paid employment in the country.
In January last year, the Canadian currency reached a high of $US 0.94 but by the end of 2014, it dropped to US$ 0.86. The slide was caused due to the reluctance of the Bank of Canada in raising interest rates as well as the reduction in global commodity prices.
The lower value of Canadian dollar however helps manufacturing in regions like Ontario. But since it increases the price of imported commodities and international travel, it tends to lower consumer confidence, which hit an 18-month low at the end of 2014.
The closing price of West Texas Intermediate crude oil at the end of 2014 was $53.71, down by a steep 46% over the course of last year.
As oil is Canada’s biggest export, the impact on the Canadian economy is expected to be severe, with the decline already leading several producers to scale back on investments. Finance minister Joe Oliver has resorted to trimming the government’s revenue outlook in November in order to account for the price fall and has also cut by half the cumulative surplus projections. Should the oil price fail to recover or even continue to fall, the impact will be reflected in the government’s budget in the coming months.
Canada’s former finance minister Jim Flaherty served a total of 2,962 days before he stepped down in March last year. His long term in the ministry is indicative of his success, which included reducing Canada’s federal tax revenue as a percentage of GDP to pre-World War 2 levels, thus helping the economy stay afloat even during the 2008 global recession.
During Flaherty’s tenure as finance minister, Canada’s economy outperformed the Group of Seven average in all but one of the years he held office.
The current finance minister Joe Oliver, who was a former investment banker, will try to prove his caliber by helping Canada reach a surplus this year.
In 2014, Canada saw foreign acquisitions worth $69.6 billion, a figure that was more than double of 2013. The main acquisition deals of 2014 included the purchase of AltaLink by a unit of Warren Buffet’s Berkshire Hathaway Inc., a $13 billion purchase of Talisman Energy by Repsol SA and Burger King Worldwide Inc.’s purchase of Tim Hortons for $13.2 billion, including debt.
These foreign acquisitions marked a reversal of the trend in 2013 when investment in Canada slowed down due to Canadian Prime Minister’s decision to restrict China’s investment in the oil sector.
Quebec’s Parti Quebecois
In the provincial elections of April 2014, Quebec’s separatist party Parti Quebecois received just 25% of the votes, which was its worst performance in the past 44 years.
The result came despite popular predictions of a majority win for the party in the French-speaking province. Because of this result, the possibility of another independence referendum has been placed under wraps for some time at least, allaying fears of any potential investors.
According to doctors, Ottawa’s bid to crack down on abuse of the temporary foreign worker program is hindering efforts to bring in a class of highly skilled labourers, the kind that Canada badly needs.
Physician recruiters across the country say the red tape and fees now associated with the program are a cause for concern for international physicians who want to fill vacancies in Canada’s hospitals and medical offices, especially in rural communities where doctor shortages are common.
A tightening of the rules in the last three years, including the most recent overhaul, announced last month, has convinced some recruiters to give up on the TFW program altogether. “Many, many, many recruiters that were doing this work back in 2011 have dropped off,” said Joan Mavrinac, head of the regional physician recruitment office for Essex County, which includes the border city of Windsor, Ont.
The TFW program had been under fire for more than a year when Employment Minister Jason Kenney and Immigration Minister Chris Alexander announced sweeping reforms designed to prevent unscrupulous employers from importing low-wage foreign workers to displace Canadian employees.
The reforms include a 10-day turnaround time to process applications for highly skilled, high-wage workers, but they do not address any of the unique concerns of doctors, many of which stem from the fact MDs are generally self-employed.
For international physicians, the TFW program has functioned as both a bridge to permanent residency and a means to work in Canada temporarily or while continuing to live in the United States. But since most are independent contractors, there is no for-profit company ready and willing to pay the fees and wade through the paperwork as there would be in the case of other high-skilled professions.
That work is often left to health authorities or local physician recruitment offices, neither of which are flush with cash.
“Doctors are independent contractors. We’re working in a grey area where the application process doesn’t allow us to check that box,” said David Gravelle, the family physician recruitment officer for Southern Georgian Bay and a spokesman for the Canadian Association of Staff Physician Recruiters (CASPR), which represents community and hospital-based recruiters.
To bring in a doctor under the TFW program, recruiters first have to secure a labour market impact assessment (LMIA), verifying there is a shortage of doctors in that location and that no qualified Canadians are available to fill it. To get an LMIA, recruiters have to place national advertisements in at least three places, including the federal government’s national job bank, for at least four weeks.
Instead of declaring a blanket shortage in one town recruiters have to secure an LMIA for every address, even if those addresses are close to each other. If a new foreign doctor wants to work at three different locations, the recruiter needs to obtain LMIAs for each location.
Prior to 2013, LMIAs were free. Last year, Ottawa introduced a $275 fee. Last month, as part of the TFW overhaul, the federal government increased the fee to $1,000 per LMIA, money Ottawa is planning to spend on beefing up and expanding inspections.
A spokesman for Employment and Social Development Canada, said that recruiters in Windsor contacted the department in 2013, and that officials have been working to sort out the difficulties there.
Mr. Kenney’s press secretary Alexandra Fortier said in a statement that the TFW program will now be administered based on wage, “because wage is a more objective and accurate reflection of skill level and labour need in a given area. This new process will allow physicians to be processed faster and will bring their applications on top of the pile.”
Ms. Mavrinac, the Essex County recruiter, said there are 16 American doctors who currently cross the border to work in her area under the TFW program. She is in the midst of processing applications for two more American doctors who want to commute from the U.S., after which she will not be accepting any others, unless they plan to relocate to Canada.
Source: The Globe And Mail