Canada: Country and Foreign Investment
Economy and Currency
Canada’s economic and technological development has been spurred by its close trade ties with the United States, which purchases around 80% of Canada’s exports.
Benefiting from rich natural resources, Canada was able to develop on par with the United States, moving swiftly from a primary (agriculture-based) economy to an affluent services-based economy, with a strong industrial sector.
Most crucial to Canada’s development was the ratification of the 1989 US-Canada Free Trade Agreement, which removed tax barriers to bilateral trade, and aided in the two countries’ economic integration. A later agreement, the 1994 North American Free Trade Agreement (NAFTA), brought about trilateral co-operation on the continent, bringing Mexico into its scope. Canada continues to run a large export surplus with the United States as the latter’s largest supplier of energy, including oil, gas, electricity and uranium.
In 2006, services accounted for 76% of the Canadian economy, with manufacturing accounting for 13%, construction 6%, and agriculture just 2% of gross domestic product (GDP).
As with many major economic players, the economic crisis has affected Canada’s growth, causing a sharp slowdown in 2008 as a result of the US housing slump, lacklustre auto sector demand, and the deterioration of world commodity prices. Canada’s GDP increased just 0.4% year-on-year, from US$1.298 trillion in 2007 to US$1.303 trillion in 2008 and was down by 2.5% to US$1.32 trillion in 2009. Since then, a slight upward turn has been evident: US$1.363 in 2010 and US$1.395. Unemployment has seen a slight fall since being recorded at 8.3% in 2009; 2010 showed a reduction to 8% and 7.5% in 2011. Over the period, GDP per head shrank from US$39,400 (in 2007) to US$39,200 (in 2008) and US$39,200 (in 2009), with increases registering in 2010 (US$40,000) and 2011 (US$40,500).
Following years of balanced budgets, public finances deteriorated in 2009 and a budget deficit of more than US$44.7bn was recorded for the first time in a decade. Having achieved modest growth in 2010 and 2011, the government plans to balance the budget by 2015.
The currency is the Canadian dollar (C$), and despite being pegged to the US dollar (US$) in the past, is not currently pegged to any currency. In 2012, C$1 = US$1.0025.