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Archived - Overview:
Economic Context

The Canadian economy has staged a strong recovery from the pandemic. Our workers and businesses have displayed remarkable resilience as the world endured multiple waves of COVID-19. Real GDP returned to pre-pandemic levels earlier than expected. Canada’s jobs recovery has outperformed its G7 peers and surpassed even the most optimistic expectations. Economic scarring from the pandemic has largely been avoided.

The impacts of the pandemic are still being felt by workers and businesses, whether from the ongoing rebalancing of consumer demand and related supply chain issues, or new realities such as increased remote work and the accelerating digitalization of our economy. Federal emergency supports managed to stabilize household finances, support millions of jobs, and keep small businesses afloat. And now, unemployment is lower than it was when the pandemic started.

However, the global economy remains fragile and any potential setbacks could have a major impact on Canada. The illegal and barbaric Russian invasion of Ukraine has led to the loss of thousands of lives and the exodus of millions of Ukrainians. For those watching from afar, the invasion is a major new source of uncertainty. The ramifications are being felt worldwide.

The invasion of Ukraine and the resulting sanctions against Russia have weighed on markets and confidence; led to a surge in commodity prices; and resulted in a deterioration of the global economic outlook. Higher commodity prices and additional supply disruptions will exacerbate the inflationary pressures already seen across the world.

As an open economy and a trading nation, Canada has to confront, head-on, longstanding challenges and new global economic dynamics. The world is changing, and Canada cannot be left behind.

We need to invest in an economy that is innovative and growth-friendly. We need to navigate a global green transition that is accelerating every day. We need to ensure that all Canadian workers, Canadian businesses, and all regions of the country benefit from it. We need to build more affordable housing to meet the growing needs of a growing workforce. We need to invest in skills and immigration to ensure that the workforce is prepared for the economy of today, and tomorrow.

The government is focused on positioning Canada to thrive in an uncertain world. Budget 2022 takes needed steps to create an environment that spurs the investments we need to grow our economy, create new, good-paying jobs for Canadians, and grow the middle class.

1. A Strong Recovery Path

Canada’s Performance Has Exceeded Expectations

The Canadian economy returned to its pre-pandemic level of activity in the fourth quarter of 2021, marking the fastest recovery of the last three recessions (Chart 1). Real GDP also grew 6.7 per cent at an annual rate in the last quarter of 2021—the second-strongest pace of growth in the G7.

The scale of the government’s emergency economic support has fostered a strong recovery, and has helped Canadians and Canadian businesses weather the pandemic.

However, the effects of economic uncertainty are evident in measures of consumer and business confidence. The Conference Board of Canada’s Index of Business Confidence was 10 per cent below its long-term average in the fourth quarter of 2021. Consumer confidence was also below its historical average as of March 2022, weighed down by concerns about inflation.

Chart 1
Real GDP Change During COVID-19 and Previous Recessions
Chart 1: Real GDP Change During COVID-19 and Previous Recessions

Notes: Three recessions are 1981-1982, 1990-1991 and 2008-2009. Last data point is 2021Q4.

Sources: Statistics Canada; Department of Finance Canada calculations.

Text version
  COVID-19 recession 2008-2009 recession 1990-1991 recession 1981-1982 recession Lower Range of Previous 3 Recessions Pre-pandemic level 2008-2009 recession
0 100.0 100.0 100.0 100.0 100.0 0.0 100.0 100.0
1 97.8 98.8 99.6 99.1 98.8 0.7 100.0 98.8
2 87.0 96.6 98.9 98.6 96.6 2.3 100.0 96.6
3 94.9 95.6 98.0 97.5 95.6 2.4 100.0 95.6
4 96.9 96.0 96.6 96.4 96.0 0.6 100.0 96.0
5 98.1 97.1 97.1 95.5 95.5 1.6 100.0 97.1
6 97.2 98.3 97.2 94.6 94.6 3.6 100.0 98.3
7 98.5 98.8 97.4 96.2 96.2 2.6 100.0 98.8
8 100.1 99.5 97.4 98.1 97.4 2.1 100.0 99.5

Canada’s Jobs Recovery Has Been Exceptionally Strong

Canada’s labour market is emerging strongly from the fifth wave of the pandemic, with the economy adding nearly 340,000 new jobs in February—more than making up for January’s loss (Chart 2). Canada has seen the fastest jobs recovery in the G7 (Chart 3)—recouping 112 per cent of the jobs lost at the outset of the pandemic, compared with 90 per cent in the U.S.

Chart 2
Employment in Canada
Chart 2: Employment in Canada

Note: Last data point is February 2022.

Source: Statistics Canada.

Text version
Feb
2020
100
Mar
2020
95
Apr
2020
84
May
2020
86
Jun
2020
91
Jul
2020
93
Aug
2020
94
Sep
2020
96
Oct
2020
96
Nov
2020
97
Dec
2020
97
Jan
2021
96
Feb
2021
97
Mar
2021
98
Apr
2021
97
May
2021
97
Jun
2021
98
Jul
2021
99
Aug
2021
99
Sep
2021
100
Oct
2021
100
Nov
2021
101
Dec
2021
101
Jan
2022
100
Feb
2022
102
Chart 3
Change in Employment Across G7 Countries Relative to February 2020
Chart 3: Change in Employment Across G7 Countries Relative to February 2020

Note: Last data point is February 2022 for Canada, Germany, Italy, and Japan; March 2022 for the United States; December 2021 for the United Kingdom; and 2021Q4 for France (which is compared to 2019 Q4).

Source: Haver Analytics.

Text version
  United Kingdom United States Japan Italy Germany France Canada
Change in Employment Across G7 Countries Relative to February 2020 -1.57216 -1.318 -1.00577 -0.39524 -0.16596 1.489537 1.92806

The February jobs report also means that all of Canada’s fiscal guardrails—from the unemployment rate, to employment rate, to actual hours worked—have effectively recovered to their pre-pandemic levels (Chart 4). Significant progress along many other labour market dimensions has also been made (Chart 5).

Chart 4
Change in Fiscal Guardrails Relative to February 2020
Chart 4: Change in Fiscal Guardrails Relative to February 2020

Note: Last data point is February 2022.

Source: Statistics Canada.

Text version
Unemployment rate (left axis) Employment rate (left axis) Total hours worked (right axis)
Feb
2020
0.0 0.0 0
Mar
2020
38.6 -5.5 -14.5634
Apr
2020
128.1 -15.8 -26.9778
May
2020
135.1 -14.2 -23.495
June
2020
114.0 -9.4 -14.9131
Jul
2020
91.2 -7.4 -10.896
Aug
2020
80.7 -6.5 -8.10112
Sep
2020
61.4 -4.5 -7.06076
Oct
2020
61.4 -4.2 -6.28935
Nov
2020
52.6 -4.0 -5.21572
Dec
2020
56.1 -4.2 -5.31214
Jan
2021
64.9 -5.3 -4.33624
Feb
2021
45.6 -3.9 -3.35738
Mar
2021
31.6 -2.6 -0.77108
Apr
2021
40.4 -3.7 -3.0558
May
2021
40.4 -4.0 -4.24
June
2021
33.3 -2.9 -3.38597
Jul
2021
29.8 -2.6 -2.81048
Aug
2021
24.6 -2.4 -2.21218
Sep
2021
22.8 -1.6 -1.5649
Oct
2021
19.3 -1.6 -0.6071
Nov
2021
7.0 -1.0 -0.21299
Dec
2021
5.263158 -0.6 0.383285
Jan
2022
14.03509 -1.8 -1.82073
Feb
2022
-3.50877 -0.2 1.66917
Chart 5
Progress in Other Key Labour Market Metrics Through February 2022
Chart 5: Progress in Other Key Labour Market Metrics Through February 2022

Note: Illustrates the extent to which labour market conditions have recovered. The recovery is shown through progress bars, where the current value (i.e., February 2022) of each measure is compared with both its trough during the pandemic and a pre-pandemic benchmark value (i.e., 2019 average). Long-term unemployed are those who have been unemployed for 27 weeks or more.

Source: Statistics Canada.

Text version
Current Level Remaining shortfall from 2019 average
Long-term unemployment rate 90% 10%
Unemployment rate, 55+ 97% 3%
Average hours worked 100% 0%
Unemployment rate, women 101% 0%
Unemployment rate, 15-24 101% 0%
Participation rate, 15-64 114% 0%

With February’s job gains, Canada’s unemployment rate dropped to 5.5 per cent, falling below its pre-pandemic level for the first time, and near the 50-year low of 5.4 per cent reached in May 2019 (Chart 6). While many advanced economies have seen significant declines in their unemployment rate, few have also experienced an increase in labour force participation to the extent Canada has (Chart 7).

Chart 6
Unemployment Rate
Chart 6: Unemployment Rate

Note: Last data point is February 2022.

Source: Statistics Canada.

Text version
Unemployment rate Pre-pandemic Level
January 1972 6
February 1972 5.8
March 1972 6.1
April 1972 5.8
May 1972 6.1
June 1972 6.3
July 1972 6.3
August 1972 6.4
September 1972 6.4
October 1972 6.6 5.4
November 1972 6.4 5.4
December 1972 6.4 5.4
January 1973 6.1 5.4
February 1973 5.9 5.4
March 1973 5.6 5.4
April 1973 5.5 5.4
May 1973 5.3 5.4
June 1973 5.4 5.4
July 1973 5.3 5.4
August 1973 5.3 5.4
September 1973 5.6 5.4
October 1973 5.7 5.4
November 1973 5.5 5.4
December 1973 5.4 5.4
January 1974 5.3 5.4
February 1974 5.2 5.4
March 1974 5.2 5.4
April 1974 5.2 5.4
May 1974 5.4 5.4
June 1974 5 5.4
July 1974 5.1 5.4
August 1974 5.3 5.4
September 1974 5.4 5.4
October 1974 5.4 5.4
November 1974 5.6 5.4
December 1974 6 5.4
January 1975 6.9 5.4
February 1975 6.6 5.4
March 1975 6.6 5.4
April 1975 6.5 5.4
May 1975 7 5.4
June 1975 7 5.4
July 1975 6.9 5.4
August 1975 7.1 5.4
September 1975 6.9 5.4
October 1975 7.2 5.4
November 1975 7.2 5.4
December 1975 7 5.4
January 1976 7.1 5.4
February 1976 7 5.4
March 1976 6.7 5.4
April 1976 6.8 5.4
May 1976 6.9 5.4
June 1976 6.9 5.4
July 1976 7.4 5.4
August 1976 7.1 5.4
September 1976 7 5.4
October 1976 7.4 5.4
November 1976 7.4 5.4
December 1976 7.5 5.4
January 1977 7.6 5.4
February 1977 7.9 5.4
March 1977 7.8 5.4
April 1977 7.9 5.4
May 1977 7.8 5.4
June 1977 7.8 5.4
July 1977 8.1 5.4
August 1977 8.2 5.4
September 1977 8.3 5.4
October 1977 8.4 5.4
November 1977 8.5 5.4
December 1977 8.5 5.4
January 1978 8.3 5.4
February 1978 8.3 5.4
March 1978 8.5 5.4
April 1978 8.4 5.4
May 1978 8.6 5.4
June 1978 8.4 5.4
July 1978 8.3 5.4
August 1978 8.4 5.4
September 1978 8.4 5.4
October 1978 8.2 5.4
November 1978 8.3 5.4
December 1978 8.3 5.4
January 1979 8.2 5.4
February 1979 8 5.4
March 1979 7.9 5.4
April 1979 8 5.4
May 1979 7.6 5.4
June 1979 7.4 5.4
July 1979 7.2 5.4
August 1979 7.1 5.4
September 1979 7 5.4
October 1979 7.2 5.4
November 1979 7.2 5.4
December 1979 7.2 5.4
January 1980 7.5 5.4
February 1980 7.6 5.4
March 1980 7.6 5.4
April 1980 7.7 5.4
May 1980 7.8 5.4
June 1980 7.7 5.4
July 1980 7.6 5.4
August 1980 7.6 5.4
September 1980 7.3 5.4
October 1980 7.3 5.4
November 1980 7.2 5.4
December 1980 7.3 5.4
January 1981 7.4 5.4
February 1981 7.4 5.4
March 1981 7.4 5.4
April 1981 7.1 5.4
May 1981 7.2 5.4
June 1981 7.2 5.4
July 1981 7.2 5.4
August 1981 7.1 5.4
September 1981 8.1 5.4
October 1981 8.3 5.4
November 1981 8.3 5.4
December 1981 8.7 5.4
January 1982 8.6 5.4
February 1982 8.9 5.4
March 1982 9.3 5.4
April 1982 9.8 5.4
May 1982 10.3 5.4
June 1982 11.1 5.4
July 1982 11.9 5.4
August 1982 12 5.4
September 1982 12.4 5.4
October 1982 12.9 5.4
November 1982 12.9 5.4
December 1982 13.1 5.4
January 1983 12.7 5.4
February 1983 12.7 5.4
March 1983 12.5 5.4
April 1983 12.4 5.4
May 1983 12.4 5.4
June 1983 12.4 5.4
July 1983 11.9 5.4
August 1983 11.7 5.4
September 1983 11.4 5.4
October 1983 11.3 5.4
November 1983 11.3 5.4
December 1983 11.3 5.4
January 1984 11.3 5.4
February 1984 11.3 5.4
March 1984 11.3 5.4
April 1984 11.5 5.4
May 1984 11.7 5.4
June 1984 11.3 5.4
July 1984 11.2 5.4
August 1984 11.3 5.4
September 1984 11.8 5.4
October 1984 11.3 5.4
November 1984 11.4 5.4
December 1984 11.1 5.4
January 1985 10.6 5.4
February 1985 10.8 5.4
March 1985 11 5.4
April 1985 10.8 5.4
May 1985 10.6 5.4
June 1985 10.7 5.4
July 1985 10.4 5.4
August 1985 10.3 5.4
September 1985 10.2 5.4
October 1985 10.3 5.4
November 1985 10.3 5.4
December 1985 10.1 5.4
January 1986 9.8 5.4
February 1986 9.9 5.4
March 1986 9.8 5.4
April 1986 9.7 5.4
May 1986 9.5 5.4
June 1986 9.6 5.4
July 1986 9.6 5.4
August 1986 9.6 5.4
September 1986 9.5 5.4
October 1986 9.4 5.4
November 1986 9.4 5.4
December 1986 9.5 5.4
January 1987 9.5 5.4
February 1987 9.5 5.4
March 1987 9.4 5.4
April 1987 9.2 5.4
May 1987 8.9 5.4
June 1987 8.9 5.4
July 1987 8.7 5.4
August 1987 8.6 5.4
September 1987 8.4 5.4
October 1987 8.3 5.4
November 1987 8.2 5.4
December 1987 8 5.4
January 1988 8.1 5.4
February 1988 7.8 5.4
March 1988 7.8 5.4
April 1988 7.7 5.4
May 1988 7.8 5.4
June 1988 7.6 5.4
July 1988 7.8 5.4
August 1988 7.8 5.4
September 1988 7.8 5.4
October 1988 7.8 5.4
November 1988 7.8 5.4
December 1988 7.5 5.4
January 1989 7.5 5.4
February 1989 7.6 5.4
March 1989 7.5 5.4
April 1989 7.8 5.4
May 1989 7.7 5.4
June 1989 7.5 5.4
July 1989 7.5 5.4
August 1989 7.3 5.4
September 1989 7.3 5.4
October 1989 7.2 5.4
November 1989 7.5 5.4
December 1989 7.7 5.4
January 1990 7.9 5.4
February 1990 7.7 5.4
March 1990 7.3 5.4
April 1990 7.6 5.4
May 1990 7.8 5.4
June 1990 7.6 5.4
July 1990 7.9 5.4
August 1990 8.1 5.4
September 1990 8.5 5.4
October 1990 8.8 5.4
November 1990 9.1 5.4
December 1990 9.5 5.4
January 1991 9.8 5.4
February 1991 10.2 5.4
March 1991 10.5 5.4
April 1991 10.3 5.4
May 1991 10.2 5.4
June 1991 10.5 5.4
July 1991 10.5 5.4
August 1991 10.5 5.4
September 1991 10.3 5.4
October 1991 10.3 5.4
November 1991 10.4 5.4
December 1991 10.3 5.4
January 1992 10.4 5.4
February 1992 10.5 5.4
March 1992 10.9 5.4
April 1992 10.7 5.4
May 1992 10.9 5.4
June 1992 11.4 5.4
July 1992 11.3 5.4
August 1992 11.7 5.4
September 1992 11.6 5.4
October 1992 11.4 5.4
November 1992 12.1 5.4
December 1992 11.7 5.4
January 1993 11.2 5.4
February 1993 11 5.4
March 1993 11.2 5.4
April 1993 11.6 5.4
May 1993 11.6 5.4
June 1993 11.7 5.4
July 1993 11.6 5.4
August 1993 11.2 5.4
September 1993 11.5 5.4
October 1993 11.3 5.4
November 1993 11.2 5.4
December 1993 11.4 5.4
January 1994 11.4 5.4
February 1994 11.1 5.4
March 1994 10.6 5.4
April 1994 10.9 5.4
May 1994 10.7 5.4
June 1994 10.3 5.4
July 1994 10.1 5.4
August 1994 10.2 5.4
September 1994 10.1 5.4
October 1994 10 5.4
November 1994 9.7 5.4
December 1994 9.6 5.4
January 1995 9.6 5.4
February 1995 9.6 5.4
March 1995 9.7 5.4
April 1995 9.5 5.4
May 1995 9.5 5.4
June 1995 9.5 5.4
July 1995 9.6 5.4
August 1995 9.5 5.4
September 1995 9.2 5.4
October 1995 9.3 5.4
November 1995 9.2 5.4
December 1995 9.4 5.4
January 1996 9.4 5.4
February 1996 9.5 5.4
March 1996 9.6 5.4
April 1996 9.3 5.4
May 1996 9.2 5.4
June 1996 9.8 5.4
July 1996 9.7 5.4
August 1996 9.4 5.4
September 1996 9.9 5.4
October 1996 9.9 5.4
November 1996 9.9 5.4
December 1996 9.7 5.4
January 1997 9.5 5.4
February 1997 9.5 5.4
March 1997 9.3 5.4
April 1997 9.4 5.4
May 1997 9.4 5.4
June 1997 9.1 5.4
July 1997 8.9 5.4
August 1997 8.9 5.4
September 1997 8.8 5.4
October 1997 8.9 5.4
November 1997 8.9 5.4
December 1997 8.5 5.4
January 1998 8.8 5.4
February 1998 8.6 5.4
March 1998 8.4 5.4
April 1998 8.3 5.4
May 1998 8.3 5.4
June 1998 8.4 5.4
July 1998 8.3 5.4
August 1998 8.1 5.4
September 1998 8.2 5.4
October 1998 8 5.4
November 1998 8 5.4
December 1998 8.1 5.4
January 1999 7.9 5.4
February 1999 7.9 5.4
March 1999 7.9 5.4
April 1999 8.2 5.4
May 1999 7.9 5.4
June 1999 7.6 5.4
July 1999 7.6 5.4
August 1999 7.4 5.4
September 1999 7.5 5.4
October 1999 7.2 5.4
November 1999 6.9 5.4
December 1999 6.8 5.4
January 2000 6.8 5.4
February 2000 6.9 5.4
March 2000 6.9 5.4
April 2000 6.7 5.4
May 2000 6.6 5.4
June 2000 6.7 5.4
July 2000 6.8 5.4
August 2000 7 5.4
September 2000 6.9 5.4
October 2000 7 5.4
November 2000 6.9 5.4
December 2000 6.8 5.4
January 2001 6.9 5.4
February 2001 7 5.4
March 2001 7.1 5.4
April 2001 7.1 5.4
May 2001 7 5.4
June 2001 7.2 5.4
July 2001 7.1 5.4
August 2001 7.2 5.4
September 2001 7.2 5.4
October 2001 7.3 5.4
November 2001 7.5 5.4
December 2001 8.1 5.4
January 2002 8 5.4
February 2002 8 5.4
March 2002 7.9 5.4
April 2002 7.7 5.4
May 2002 7.8 5.4
June 2002 7.6 5.4
July 2002 7.6 5.4
August 2002 7.4 5.4
September 2002 7.5 5.4
October 2002 7.6 5.4
November 2002 7.4 5.4
December 2002 7.5 5.4
January 2003 7.5 5.4
February 2003 7.5 5.4
March 2003 7.4 5.4
April 2003 7.6 5.4
May 2003 7.8 5.4
June 2003 7.6 5.4
July 2003 7.7 5.4
August 2003 7.8 5.4
September 2003 7.8 5.4
October 2003 7.6 5.4
November 2003 7.4 5.4
December 2003 7.3 5.4
January 2004 7.3 5.4
February 2004 7.3 5.4
March 2004 7.3 5.4
April 2004 7.2 5.4
May 2004 7.1 5.4
June 2004 7.2 5.4
July 2004 7.1 5.4
August 2004 7 5.4
September 2004 6.9 5.4
October 2004 7.1 5.4
November 2004 7.2 5.4
December 2004 7.1 5.4
January 2005 7 5.4
February 2005 7 5.4
March 2005 6.9 5.4
April 2005 6.7 5.4
May 2005 7 5.4
June 2005 6.8 5.4
July 2005 6.7 5.4
August 2005 6.7 5.4
September 2005 6.7 5.4
October 2005 6.7 5.4
November 2005 6.4 5.4
December 2005 6.6 5.4
January 2006 6.6 5.4
February 2006 6.4 5.4
March 2006 6.4 5.4
April 2006 6.3 5.4
May 2006 6.1 5.4
June 2006 6.1 5.4
July 2006 6.4 5.4
August 2006 6.4 5.4
September 2006 6.4 5.4
October 2006 6.2 5.4
November 2006 6.4 5.4
December 2006 6.2 5.4
January 2007 6.3 5.4
February 2007 6.2 5.4
March 2007 6.2 5.4
April 2007 6.2 5.4
May 2007 6 5.4
June 2007 6.1 5.4
July 2007 6 5.4
August 2007 5.9 5.4
September 2007 5.9 5.4
October 2007 5.9 5.4
November 2007 6.1 5.4
December 2007 6.1 5.4
January 2008 5.9 5.4
February 2008 6 5.4
March 2008 6.2 5.4
April 2008 6.1 5.4
May 2008 6.1 5.4
June 2008 6.1 5.4
July 2008 6.1 5.4
August 2008 6.1 5.4
September 2008 6.1 5.4
October 2008 6.2 5.4
November 2008 6.6 5.4
December 2008 6.9 5.4
January 2009 7.4 5.4
February 2009 8 5.4
March 2009 8.2 5.4
April 2009 8.3 5.4
May 2009 8.7 5.4
June 2009 8.7 5.4
July 2009 8.7 5.4
August 2009 8.6 5.4
September 2009 8.4 5.4
October 2009 8.5 5.4
November 2009 8.5 5.4
December 2009 8.5 5.4
January 2010 8.3 5.4
February 2010 8.3 5.4
March 2010 8.3 5.4
April 2010 8.2 5.4
May 2010 8.1 5.4
June 2010 8 5.4
July 2010 8 5.4
August 2010 8.1 5.4
September 2010 8.2 5.4
October 2010 8 5.4
November 2010 7.7 5.4
December 2010 7.7 5.4
January 2011 7.8 5.4
February 2011 7.7 5.4
March 2011 7.7 5.4
April 2011 7.7 5.4
May 2011 7.6 5.4
June 2011 7.6 5.4
July 2011 7.3 5.4
August 2011 7.3 5.4
September 2011 7.4 5.4
October 2011 7.4 5.4
November 2011 7.6 5.4
December 2011 7.5 5.4
January 2012 7.7 5.4
February 2012 7.5 5.4
March 2012 7.3 5.4
April 2012 7.3 5.4
May 2012 7.4 5.4
June 2012 7.2 5.4
July 2012 7.3 5.4
August 2012 7.3 5.4
September 2012 7.3 5.4
October 2012 7.5 5.4
November 2012 7.4 5.4
December 2012 7.3 5.4
January 2013 7.1 5.4
February 2013 7.1 5.4
March 2013 7.3 5.4
April 2013 7.2 5.4
May 2013 7 5.4
June 2013 7.2 5.4
July 2013 7.1 5.4
August 2013 7.1 5.4
September 2013 7.1 5.4
October 2013 7.1 5.4
November 2013 7 5.4
December 2013 7.3 5.4
January 2014 7.1 5.4
February 2014 7.1 5.4
March 2014 7 5.4
April 2014 7.1 5.4
May 2014 7.1 5.4
June 2014 7.1 5.4
July 2014 7.1 5.4
August 2014 7 5.4
September 2014 6.9 5.4
October 2014 6.7 5.4
November 2014 6.7 5.4
December 2014 6.7 5.4
January 2015 6.7 5.4
February 2015 6.8 5.4
March 2015 6.9 5.4
April 2015 6.9 5.4
May 2015 6.9 5.4
June 2015 6.9 5.4
July 2015 6.9 5.4
August 2015 7 5.4
September 2015 7.1 5.4
October 2015 6.9 5.4
November 2015 7.1 5.4
December 2015 7.2 5.4
January 2016 7.2 5.4
February 2016 7.3 5.4
March 2016 7.1 5.4
April 2016 7.2 5.4
May 2016 7 5.4
June 2016 6.9 5.4
July 2016 7 5.4
August 2016 7 5.4
September 2016 7 5.4
October 2016 7 5.4
November 2016 6.9 5.4
December 2016 7 5.4
January 2017 6.8 5.4
February 2017 6.6 5.4
March 2017 6.7 5.4
April 2017 6.5 5.4
May 2017 6.6 5.4
June 2017 6.5 5.4
July 2017 6.3 5.4
August 2017 6.2 5.4
September 2017 6.2 5.4
October 2017 6.3 5.4
November 2017 6 5.4
December 2017 5.9 5.4
January 2018 6 5.4
February 2018 5.9 5.4
March 2018 5.9 5.4
April 2018 5.9 5.4
May 2018 6 5.4
June 2018 6.1 5.4
July 2018 5.8 5.4
August 2018 6 5.4
September 2018 5.9 5.4
October 2018 5.9 5.4
November 2018 5.7 5.4
December 2018 5.8 5.4
January 2019 5.9 5.4
February 2019 5.9 5.4
March 2019 5.8 5.4
April 2019 5.8 5.4
May 2019 5.4 5.4
June 2019 5.5 5.4
July 2019 5.8 5.4
August 2019 5.8 5.4
September 2019 5.6 5.4
October 2019 5.7 5.4
November 2019 6 5.4
December 2019 5.8 5.4
January 2020 5.6 5.4
February 2020 5.7 5.4
March 2020 7.9 5.4
April 2020 13 5.4
May 2020 13.4 5.4
June 2020 12.2 5.4
July 2020 10.9 5.4
August 2020 10.3 5.4
September 2020 9.2 5.4
October 2020 9.2 5.4
November 2020 8.7 5.4
December 2020 8.9 5.4
January 2021 9.4 5.4
February 2021 8.3 5.4
March 2021 7.5 5.4
April 2021 8 5.4
May 2021 8 5.4
June 2021 7.6 5.4
July 2021 7.4 5.4
August 2021 7.1 5.4
September 2021 7 5.4
October 2021 6.8 5.4
November 2021 6.1 5.4
December 2021 6 5.4
January 2022 6.5 5.4
February 2022 5.5 5.4
Chart 7
Change in the Labour Force Participation Rate Across G7 Countries Relative to 2019Q4
Chart 7: Change in the Labour Force Participation Rate Across G7 Countries Relative to 2019Q4

Note: For Ages 15-64. Shows the change from 2019Q4 to the latest quarter, which is 2021Q4 for all countries.

Sources: Statistics Canada; OECD.

Text version
  United Kingdom United States Japan Italy Canada Germany France
Change in Employment Across G7 Countries Relative to February 2020 -0.73886 -0.69818 0.27764 0.40206 0.83334 1.07395 1.17772

While tight labour markets are leading to improved opportunities for workers, it also creates significant and pressing challenges for businesses looking to hire more workers. Employers were actively recruiting for more than 900,000 jobs in the fourth quarter of 2021, pointing to continued strong labour demand and the potential for wage growth to increase further.

2. From Pandemic to Conflict

Russia’s Invasion Is Dragging Down Global Growth

The unprovoked and unjustified Russian invasion of Ukraine is a significant headwind for the global economic outlook. The economic damage risks becoming increasingly severe and long-lasting and the economic shockwaves from the war will be felt by consumers around the world through higher energy and food prices. These effects—along with disruptions to trade, tighter financial conditions, and fragile confidence—will contribute to a meaningful weakening of global economic growth if the conflict persists.

While Russia and Ukraine account for less than 2 per cent of global GDP, they are major suppliers of key commodities such as wheat, energy, potash, palladium, and nickel. As a result, the invasion of Ukraine—and the significant sanctions imposed on Russia’s economy—have jolted commodity markets with a surge in prices (Chart 8). With sanctions likely to remain for some time and a longer-term strategic shift away from Russian resources in some parts of the world, certain commodity prices are poised to remain elevated and volatile. Though higher commodity prices are leading to a surge in Canada’s terms of trade (the ratio of export prices to import prices), sharply higher prices risk causing hardship for many households and disrupting the production of goods and services worldwide (Chart 9). Europe in particular is highly dependent on Russian natural gas and crude oil.

Chart 8
Change in Selected Commodity Prices Since January 3, 2022
Chart 8: Change in Selected Commodity Prices Since January 3, 2022

Note: Unless otherwise noted, prices are based on North American prices and benchmarks; all priced in U.S. dollars. Last data point is March 31, 2022.

Source: Bloomberg.

Text versionThis chart illustrates that since January 3rd, 2022, there has been a broad-based surge in commodity prices, such as crude oil, natural gas, industrial metals, fertilizers and wheat.
Chart 9
Commodity Prices and Canada’s Terms of Trade
Chart 9: Commodity Prices and Canada’s Terms of Trade

Note: The commodity price index is a production-weighted composite of U.S.-dollar benchmark commodity prices. Last data point for the commodity price index and terms of trade are 2022Q1 and 2021Q4, respectively.

Sources: Statistics Canada; Department of Finance Canada calculations.

Text version
  Commodity price index (left) Terms of trade (right)
2007
Q1
189.6928 96.7913
2007
Q2
205.82 97.82799
2007
Q3
203.5575 97.51194
2007
Q4
222.4361 101.2335
2008
Q1
255.2712 105.1521
2008
Q2
307.7058 107.393
2008
Q3
287.1943 104.5284
2008
Q4
172.404 93.63974
2009
Q1
143.4145 89.93023
2009
Q2
160.5183 91.45722
2009
Q3
168.1347 94.1297
2009
Q4
187.2157 97.54968
2010
Q1
205.4286 99.38269
2010
Q2
199.4182 97.77084
2010
Q3
196.286 96.73041
2010
Q4
211.1062 99.0967
2011
Q1
232.8534 101.5948
2011
Q2
254.8192 102.2966
2011
Q3
236.6196 100.922
2011
Q4
231.4128 101.2797
2012
Q1
226.7245 100.845
2012
Q2
211.7521 98.48296
2012
Q3
214.416 99.37263
2012
Q4
218.5064 101.3066
2013
Q1
219.7503 101.3618
2013
Q2
220.7802 101.0332
2013
Q3
229.6289 100.6635
2013
Q4
202.1334 99.48374
2014
Q1
220.4435 101.4879
2014
Q2
225.8313 100.0113
2014
Q3
214.2803 99.44034
2014
Q4
181.9022 96.16357
2015
Q1
139.5004 93.42845
2015
Q2
152.346 93.60863
2015
Q3
129.8067 91.64877
2015
Q4
115.789 90.45916
2016
Q1
104.1432 88.78514
2016
Q2
125.6054 91.01972
2016
Q3
125.8417 91.8584
2016
Q4
134.033 93.29837
2017
Q1
142.2647 94.91799
2017
Q2
142.7959 93.56527
2017
Q3
144.5772 94.00274
2017
Q4
149.9609 95.77443
2018
Q1
155.0879 95.93218
2018
Q2
172.8929 96.82548
2018
Q3
157.9224 95.8843
2018
Q4
132.8846 91.08559
2019
Q1
154.4936 94.14696
2019
Q2
155.449 94.62645
2019
Q3
149.7186 93.7247
2019
Q4
143.0832 94.35477
2020
Q1
126.9627 89.74985
2020
Q2
107.6685 87.05945
2020
Q3
142.5226 92.61959
2020
Q4
148.9363 94.85722
2021
Q1
192.333 101.0299
2021
Q2
222.2305 105.6619
2021
Q3
211.8022 103.9495
2021
Q4
226.659 105.0276
2022
Q1
286.42  

The heightened level of uncertainty, along with deterioration of the global economic outlook, is also affecting investor and business confidence globally. This has translated into significant weakness in equity markets worldwide, with most major global stock market indices—especially those in Europe—still down from their peaks. The longer the Russia-Ukraine conflict lasts, the greater the downside will be.

If recent moves in commodity prices and financial markets were to persist for a year, the Organisation for Economic Co-operation and Development (OECD) estimates that it could reduce global growth by more than 1 percentage point in the first year (Chart 10), while global inflation could be at least 2.5 percentage points higher. The economic impact will vary heavily by region. In Russia, the conflict along with the direct blow from significant economic and financial sanctions, could lead the economy to suffer a severe recession. Given close trade ties and financial links to Russia and Ukraine, the euro area is likely to be one of the most affected regions, with its real GDP expected to be reduced by 1.4 per cent over the first full year after the start of the conflict.

As a commodity producer with limited economic ties to Russia, Canada is more insulated from the crisis than other countries. While weaker global growth and much higher commodity prices will reduce consumers’ purchasing power and push up costs for businesses, Canada also stands to benefit from the positive impact on Canada’s terms of trade and from being able to export commodities now in short supply. The impact of the conflict on economic activity in Canada cannot be definitively predicted, but deep uncertainty emanating from the conflict points to risks tilted to the downside.

Chart 10
Impact on Real GDP in a First Full Year of the Russian Invasion of Ukraine
Chart 10: Impact on Real GDP in a First Full Year of the Russian Invasion of Ukraine

Note: Simulated impact on real GDP over a one year period beginning 24 February 2022.

Source: OECD.

Text version
Impact on real GDP
Euro Area -1.4
OECD -1.0
United
States
-0.9
World -1.1
World
excluding
Russia
-0.8
Russia
(right scale)
-10.5

High Global Inflation and the Outlook for Canada

While inflation is a global challenge, the impacts on Canadians are real. The majority of Canadians remain concerned about the cost of living. As a first line of defence, many of the direct income supports that financially vulnerable Canadians rely on are automatically adjusted to inflation. Further, the government is taking crucial steps to help make life more affordable for more Canadians, while investing to grow the economy and create jobs – the best sustainable route to rising living standards in the long-run.

Making Life More Affordable

Making life more affordable is one of the government’s primary goals in Budget 2022. In the long run, this will require addressing long-standing, structural challenges to deliver meaningful improvements in living standards for more Canadians.

In the near term, Canadians can be confident that they have access to support when they need it most. Since 2015, the government has delivered real improvements to make Canadians’ lives more affordable, including:

  • Making an historic investment of $30 billion over five years to build a Canada-wide early learning and child care system in collaboration with provinces, territories, and Indigenous partners. By the end of 2022, child care fees will have been reduced by an average of 50 per cent, and by 2025-26, the average child care fee for all regulated child care spaces across Canada will be $10 a day;
  • Introducing the Canada Child Benefit, which will provide up to $6,833 per child to Canadian families this year, and has helped 435,000 children out of poverty since 2015;
  • Expanding the Canada Workers Benefit to support an estimated one million additional Canadians, which could mean 1,000 more per year for a full-time, minimum-wage worker;
  • Increasing the federal minimum wage to $15.55 per hour;
  • Implementing a ten per cent increase to the maximum GIS benefit for single seniors, and reversing the announced increase to the eligibility for OAS and GIS back to age 65 from 67;
  • Providing ten days of paid sick leave for all federally regulated private sector employees;
  • Increasing Climate Action Incentive payments, which puts more money in the pockets of eight out of every ten people in the provinces where the federal system applies, and means a family of four in will receive, for 2022-2023, $745 in Ontario, $832 in Manitoba, $1,101 in Saskatchewan and $1,079 in Alberta; and,
  • Making post-secondary education more affordable by waiving interest on Canada Student Loans until March 2023 and enhancing repayment assistance to ensure that no person making $40,000 or less will need to make payments on their federal student loans going forward.

Budget 2022 also includes a range of measures that will help to bring down the cost of living, including:

  • $5.3 billion to provide dental care for Canadians with family incomes of less than $90,000 annually, starting with under 12 years-olds in 2022, expanding to under 18 years-olds, seniors and persons living with a disability in 2023, with full implementation by 2025;
  • Doubling support provided through the First Time Home Buyers’ Tax Credit from $750 to $1,500;
  • Introducing a Multigenerational Home Renovation Tax Credit, which provides up to $7,500 in support for constructing a secondary suite; and,
  • $475 million in 2022-23 to provide a one-time, $500 payment to those facing housing affordability challenges.

Budget 2022 also includes a comprehensive plan to make housing more affordable, focused on doubling the rate of new builds over the next decade, while introducing measures to help Canadians buy their first home, protect buyers and renters, and curb foreign investment and speculation.

Key government benefits are also adjusted for inflation over time, including, among others, Old Age Security (OAS), the Guaranteed Income Supplement (GIS), the Canada Child Benefit, and the GST Credit.

Looking ahead, Budget 2022 redoubles the government’s focus on expanding Canada’s economic capacity with investments to create jobs and boost growth through innovation and skills development; facilitate the transition to a low-carbon economy by encouraging private sector investments and targeting major sources of emissions; drive innovation and business growth; and make our cities more competitive by expanding the supply of housing. These investments will provide the foundation for boosting Canada’s long-term growth and creating good-paying jobs— the best way to make life affordable for years to come.

Even before the invasion of Ukraine, elevated inflation was undermining consumer and business confidence around the world. Economists have had to repeatedly revise their forecasts as global inflation has proven to be stronger and more persistent than anticipated. In advanced economies, inflation has now reached levels not seen in decades. This is creating uncertainty about how quickly—and at what cost—central banks can rein in inflation.

The current global concern over inflation comes after decades during which inflation was very low. Several factors have driven inflation up, including higher food and energy prices, supply constraints associated with the pandemic, and unprecedented demand for goods. In many advanced economies, inflation pressures have started to broaden as wage pressures build in a context marked by tight labour markets.

While inflation in Canada is more moderate than in some other countries, total consumer price inflation reached 5.7 per cent year-over-year in February—the highest level since August 1991 (Chart 11). In addition to global pressures on the prices of goods, strong demand for housing—combined with limited supply—has also led to surging house prices (Chart 12). Canadians are facing higher-than-expected costs of living which is putting the squeeze on household finances across the country—and could lead to lower economic activity and confidence over time.

Chart 11
Consumer Price Inflation in Select Economies
Chart 11: Consumer Price Inflation in Select Economies

Note: Last data point is February 2022 for all regions but the G20, for which it is January 2022.

Sources: Haver Analytics; OECD.

Text version
United States Canada U.K. Germany Euro area G20
January 2019 1.6 1.4 1.8 1.4 1.4 3.3
February 2019 1.5 1.5 1.9 1.5 1.5 3.3
March 2019 1.9 1.9 1.9 1.3 1.4 3.6
April 2019 2.0 2.0 2.1 2.0 1.7 3.9
May 2019 1.8 2.4 2.0 1.4 1.2 3.9
June 2019 1.6 2.0 2.0 1.6 1.3 3.6
July 2019 1.8 2.0 2.1 1.7 1.0 3.4
August 2019 1.7 1.9 1.7 1.4 1.0 3.4
September 2019 1.7 1.9 1.7 1.2 0.8 3.3
October 2019 1.8 1.9 1.5 1.1 0.7 3.4
November 2019 2.1 2.2 1.5 1.1 1.0 3.8
December 2019 2.3 2.2 1.3 1.5 1.3 4.1
January 2020 2.5 2.4 1.8 1.7 1.4 4.1
February 2020 2.3 2.2 1.7 1.7 1.2 4.0
March 2020 1.5 0.9 1.5 1.4 0.7 3.3
April 2020 0.3 -0.2 0.8 0.9 0.3 2.5
May 2020 0.1 -0.4 0.5 0.6 0.1 2.2
June 2020 0.6 0.7 0.6 0.9 0.3 2.4
July 2020 1.0 0.1 1.0 -0.1 0.4 2.5
August 2020 1.3 0.1 0.2 0.0 -0.2 2.6
September 2020 1.4 0.5 0.5 -0.2 -0.3 2.5
October 2020 1.2 0.7 0.7 -0.2 -0.3 2.3
November 2020 1.2 1.0 0.3 -0.3 -0.3 2.1
December 2020 1.4 0.7 0.6 -0.3 -0.3 2.1
January 2021 1.4 1.0 0.7 1.0 0.9 2.2
February 2021 1.7 1.1 0.4 1.3 0.9 2.5
March 2021 2.6 2.2 0.7 1.7 1.3 3.2
April 2021 4.2 3.4 1.5 2.0 1.6 3.8
May 2021 5.0 3.6 2.1 2.5 2.0 4.4
June 2021 5.4 3.1 2.5 2.3 1.9 4.5
July 2021 5.4 3.7 2.0 3.8 2.2 4.6
August 2021 5.3 4.1 3.2 3.9 3.0 4.5
September 2021 5.4 4.4 3.1 4.1 3.4 4.6
October 2021 6.2 4.7 4.2 4.5 4.1 5.2
November 2021 6.8 4.7 5.1 5.2 4.9 5.9
December 2021 7.0 4.8 5.4 5.3 5.0 6.1
January 2022 7.5 5.1 5.5 4.9 5.1 6.5
February 2022 7.9 5.7 6.2 5.1 5.9  
Chart 12
Deviation of Consumer Price Inflation From Its Long-Term Average, Canada
Chart 12: Deviation of Consumer Price Inflation From Its Long-Term Average, Canada

Note: The long-term average is calculated over the period 1997-2019. Last data point is February 2022.

Source: Statistics Canada.

Text versionThe chart shows the deviation of consumer price inflation from its long-term average (1997-2019). As of February, the consumer price index is about 3.8 percentage points higher than its long-term average. As illustrated, price acceleration is driven by goods and shelter services, which are respectively about 3 percentage points and 1 percentage points higher than their long-term average. This is offset by lower growth of other services prices, which are about 0.2 percentage point below its long-term average.

A rebalancing of global demand towards services—after pandemic-related public health measures saw people redirect their spending heavily towards goods—along with the easing of supply bottlenecks should help to reduce global inflationary pressures over the course of the year. However, the Russian invasion of Ukraine is causing higher prices for food, energy, and other key commodities. In addition, a resurgence of COVID-19 in China has led to lockdowns that are disrupting global manufacturing supply chains once again. As a result, uncertainty remains about the outlook for inflation.

In response to these pressures, central banks—including the Bank of Canada and the U.S. Federal Reserve—have begun to withdraw monetary stimulus. The Bank of Canada has been clear that it will use its monetary policy tools to return inflation to the 2 per cent target and keep inflation expectations well-anchored. Inflation is expected to be broadly in line with the Bank of Canada’s 2 per cent inflation target in 2023.

Housing Supply Challenges and Affordability

Housing demand has been very strong during the pandemic, which was the result of low borrowing costs combined with people’s desire for more space as they worked from home. Though builders have responded with new residential construction rising well above pre-pandemic levels, housing supply has been unable to keep up with demand (Chart 13).

With inventories at record lows, house prices have rapidly increased across the country (Chart 14), making affordability a real concern. British Columbia and Ontario have endured longstanding supply constraints and prospective home buyers in those markets are facing the most acute affordability challenges; Toronto in particular has recently seen the largest increases in house prices since 2015. Rental markets are facing similar challenges with constrained supply putting pressure on rents.

Looking ahead, housing demand is expected to ease as interest rates rise and the pandemic-related boost in demand fades. In combination with the increase in new construction, this will help to slow house price growth. However, it will take years of strong supply growth to address the very real affordability challenges Canadians in many regions are facing. The federal government is working with all orders of government to increase supply and address the issues of housing affordability. As outlined in Chapter 1, Budget 2022 makes a series of significant investments to help jump start the construction of more  affordable homes.

Chart 13
Changes in Key Measures of Housing Activity
Chart 13: Changes in Key Measures of Housing Activity

Note: February 2022 is a seasonally adjusted annualized figure.

Source: Canadian Real Estate Association.

Text versionThe chart shows the percentage change in housing resales, the sales-to-new listings ratio and housing starts in 2020, 2021, and February 2022 relative to 2019 levels. Housing market activity has been exceptionally strong over the last two years. As of February, resales are 42% higher than in 2019, the sales-to-new listings ratio is 26% higher and housing starts are 18% higher.
Chart 14
House Price Growth
Chart 14: House Price Growth

Note: Latest data point is February 2022. Other major Canadian cities include Calgary, Edmonton, Regina, Saskatoon, Winnipeg, Ottawa, Montreal and Moncton.

Source: Canadian Real Estate Association.

Text versionThe chart shows the sales-weighted benchmark house price growth from 2015 to February 2022 of Toronto and Vancouver, and other major Canadian cities. Home prices have seen broad-based, rapid growth since the start of the pandemic. While price growth has slowed in other Canadian cities since mid-2021, it has continued to gain ground in Toronto and Vancouver, surpassing its previous peak reached in 2017.

3. Budget 2022 Economic Environment

Survey of Private Sector Economists

The Department of Finance Canada surveyed the group of private sector economists in early February 2022. The average of private sector forecasts has been used as the basis for economic and fiscal planning since 1994, helping to ensure objectivity and transparency, and introducing an element of independence into the government’s economic and fiscal forecast. 

Following a strong rebound of 4.6 per cent in 2021, real GDP was expected to grow by a still solid 3.9 per cent in 2022 (down from 4.2 per cent in the 2021 Economic and Fiscal Update) and by 3.1 per cent in 2023 (up from 2.8 per cent in the 2021 Economic and Fiscal Update) (Chart 15 and Chart 16).

Chart 15
Real GDP Growth Projections
Chart 15: Real GDP Growth Projections

Sources: Statistics Canada; Department of Finance Canada November 2021 and February 2022 surveys of private sector economists; Department of Finance Canada calculations.

Text version
  Economic and Fiscal Update 2021 (November 2021 survey) February 2022 survey
2021
Q4
5.1 6.7
2022
Q1
4.8 1.0
2022
Q2
4.9 6.4
2022
Q3
4.1 4.8
2022
Q4
3.0 3.5
   
2021 4.5 4.6
2022 4.2 3.9
2023 2.8 3.1

Significantly stronger-than-expected GDP inflation—driven by consumer price inflation and commodity prices—provided a material boost to the expected level of nominal GDP (the broadest measure of the tax base), which was up by an average of roughly $41 billion per year over the forecast horizon in the February 2022 survey compared to the 2021 Economic and Fiscal Update (Chart 17). Importantly, Canada’s nominal GDP continues to outperform expectations, as it has over the course of the recovery from the pandemic.

Chart 16
Real GDP Projections
Chart 16: Real GDP Projections

Sources: Statistics Canada; Department of Finance Canada December 2019, September 2020, November 2021 and February 2022 surveys of private sector economists; Department of Finance Canada calculations.

Text version
  Pre-pandemic track Economic and Fiscal Update 2021 February 2022 survey
2021
Q3
103.1 98.5 98.5
2021
Q4
103.5 99.7 100.1
2022
Q1
104.0 100.9 100.3
2022
Q2
104.5 102.1 101.9
2022
Q3
104.9 103.1 103.1
2022
Q4
105.4 103.9 104.0
2023
Q1
105.9 104.6 104.6
2023
Q2
106.4 105.1 105.3
2023
Q3
106.9 105.6 105.8
2023
Q4
107.4 106.1 106.3
2024
Q1
107.9 106.6 106.9
2024
Q2
108.4 107.2 107.4
2024
Q3
108.9 107.7 107.9
2024
Q4
109.4 108.2 108.4
Chart 17
Nominal GDP Projections
Chart 17: Nominal GDP Projections

Sources: Statistics Canada; Department of Finance Canada December 2019, September 2020, November 2021 and February 2022 surveys of private sector economists; Department of Finance Canada calculations.

Text version
  Pre-pandemic track Economic and Fiscal Update 2021 February 2022 survey
2021
Q3
106.7 107.2 107.2
2021
Q4
107.7 109.3 110.7
2022
Q1
108.7 110.9 111.7
2022
Q2
109.8 112.5 113.9
2022
Q3
110.8 114.0 115.6
2022
Q4
111.9 115.3 117.0
2023
Q1
113.0 116.4 118.3
2023
Q2
114.0 117.5 119.6
2023
Q3
115.1 118.6 120.7
2023
Q4
116.2 119.7 121.7
2024
Q1
117.3 120.9 123.0
2024
Q2
118.5 122.1 124.2
2024
Q3
119.6 123.2 125.4
2024
Q4
120.7 124.4 126.6

Budget 2022 Economic Scenario Analysis

The macroeconomic inputs of the February 2022 survey continue to provide a reasonable basis for fiscal planning (see Annex 1 for details of the economic and fiscal planning framework). However, the outlook is clouded by a number of key uncertainties, including the impact of Russia’s illegal invasion of Ukraine; the impact on supply chains due to the COVID-19 resurgence in China; the effects of supply and labour shortages on inflation; and the impact of rising interest rates on the Canadian economy.  

The Department of Finance actively engages with external economists to assess risks and uncertainties to the outlook. Throughout March, the Department closely tracked evolving external views and forecasts. This information was used to inform two alternative economic scenarios that illustrate the effects of unusually high uncertainty around the illegal Russian invasion of Ukraine and its spillovers:

Chart 18
Real GDP Growth
Chart 18: Real GDP Growth

Sources: Department of Finance Canada February 2022 survey of private sector economists; Department of Finance Canada calculations

Text version
February 2022 Survey Heightened impact scenario Moderate impact scenario
2022 3.9 2.8 4.3
2023 3.1 0.4 4.0
2024 2.0 2.0 2.1
2025 1.9 2.4 1.8
2026 1.8 2.2 1.7
Chart 19
Nominal GDP Level Difference With February 2022 Survey Outlook
Chart 19: Nominal GDP Level Difference With February 2022 Survey Outlook

Sources: Department of Finance Canada February 2022 survey of private sector economists; Department of Finance Canada calculations..

Text version
Heightened impact scenario Moderate impact scenario
2022 126 57
2023 18 86
2024 -21 82
2025 -25 79
2026 -22 79

Details on these scenarios are outlined in Annex 1. Estimated fiscal impacts associated with these scenarios are illustrated below.

4. Budget 2022 Fiscal Framework

A Responsible Fiscal Plan

Over the course of the pandemic, the federal government deployed one of the most effective response plans in the world to protect Canadian workers and businesses. Approximately eight out of every ten dollars invested to support Canadians and fight COVID-19 has come from the federal government.

This response saved lives and kept Canada’s economy afloat—while also limiting the debt and deficits of Canada’s provinces and territories. Provincial and territorial governments continued to significantly outperform fiscal projections for 2021-22. Fiscal results to date show that the aggregate provincial-territorial deficit was less than one-third of what was expected at the time of 2021 budgets, a much larger improvement than at the federal level. As a result, the aggregate provincial-territorial balance is expected to have declined to just 1 per cent of GDP in 2021-22 (Chart 20).

Chart 20
Budgetary Balances, Canada and Provincial-Territorial Aggregate
Chart 20: Budgetary Balances, Canada and Provincial-Territorial Aggregate

Sources: Federal, provincial and territorial public accounts, budgets and fiscal updates; Department of Finance Canada calculations

Text version
2020-21 2021-22
Provincial-territorial aggregate -2.1 -1.0
Canada -14.9 -4.6

The significant investments the federal government made have worked. And the Canadian economy’s recovery has been swift and strong. But these were, and must remain, emergency measures. Budget 2022 firmly pivots the government’s focus from broad-based emergency COVID-19 expenditures—and towards targeted investments that will build Canada’s economic capacity, prosperity, resilience, and security in two ways:

Table 1
Economic and Fiscal Developments and Policy Actions and Measures
billions of dollars
Projection
2021–
2022
2022–
2023
2023–
2024
2024–
2025
2025–
2026
2026–
2027
Budgetary balance – EFU 2021 -144.5 -58.4 -43.9 -29.1 -22.7 -13.1
Economic and fiscal developments
since EFU 2021
36.1 14.3 11.7 7.5 8.5 7.4
Budgetary balance before policy
actions and measures
-108.5 -44.1 -32.3 -21.6 -14.2 -5.8
Policy actions since EFU 2021 -3.1 -1.3 -0.6 0.6 0.4 0.3
Budget 2022 measures (by
chapter)
           
1. Making Housing More Affordable -0.7 -2.0 -2.2 -2.1 -2.2 -1.0
2. A Strong, Growing, and
Resilient Economy
0.0 -0.3 -1.4 -1.2 -1.3 -1.3
reprofiling infrastructure investments
0.1 0.2 0.8 1.2 2.0 2.1
3. Clean Air and Strong Economy 0.0 -1.3 -2.2 -3.0 -2.9 -3.0
4. Creating Good Middle Class Jobs 0.0 -0.8 -1.3 -1.4 -1.2 -1.2
5. Canada’s Leadership in the World 0.0 -1.7 -1.5 -1.9 -2.0 -2.3
6. Strong Public Health Care -1.3 -0.7 -0.8 -1.3 -1.4 -1.6
7. Moving Forward on Reconciliation -0.2 -2.5 -2.0 -1.9 -1.9 -2.0
8. Safe and Inclusive Communities 0.0 -0.2 -0.4 -0.4 -0.3 -0.3
9.1 Tax Fairness 0.0 2.0 3.3 3.6 3.7 3.9
9.2 Effective Government 0.0 0.0 0.7 1.7 2.7 3.7
Total Budget 2022 measures -2.2 -7.4 -7.1 -6.7 -4.8 -3.0
Budgetary balance -113.8 -52.8 -39.9 -27.8 -18.6 -8.4
Budgetary balance (% of GDP) -4.6 -2.0 -1.4 -0.9 -0.6 -0.3
Federal debt (% of GDP) 46.5 45.1 44.5 43.8 42.8 41.5
Heightened Impact Scenario -113.8 -39.5 -43.7 -41.1 -32.2 -21.1
Budgetary Balance (%GDP) -4.6 -1.4 -1.5 -1.4 -1.1 -0.7
Federal debt (%GDP) 46.5 42.6 43.9 44.2 43.7 42.8
Moderate Impact Scenario -113.8 -48.2 -31.3 -21.6 -13.2 -2.7
Budgetary Balance (%GDP) -4.6 -1.8 -1.1 -0.7 -0.4 -0.1
Federal debt (%GDP) 46.5 44.0 42.7 41.9 40.9 39.5

After accounting for Budget 2022 measures and incremental policy actions since the 2021 Economic and Fiscal Update, the budgetary balance is expected to remain below that projected in the 2021 Economic and Fiscal Update, with a $113.8 billion expected deficit in 2021-22, improving to a projected deficit of $8.4 billion in 2026-27, or about 0.3 per cent of GDP. The federal debt is expected to decline from 46.5 per cent of GDP in 2021-22 to 41.5 per cent of GDP in 2026-27.  Looking out over the next five years, the federal deficit (Chart 21) and debt as a share of the economy (Chart 22) are both expected to decline each year.

Chart 21
Budgetary Balance
Chart 21: Budgetary Balance

Source: Department of Finance Canada.

Text version
Budgetary Balance (per cent of GDP) 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27
Budget 2022 -14.9 -4.6 -2.0 -1.4 -0.9 -0.6 -0.3
Economic and Fiscal Update 2021 -14.9 -5.8 -2.2 -1.6 -1.0 -0.8 -0.4
Chart 22
Federal Debt
Chart 22: Federal Debt

Source: Department of Finance Canada.

Text version
per cent 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27
2021 Economic and Fiscal Update 47.5 48 47.3 46.9 46.2 45.3 44
Budget 2022 47.5 46.5 45.1 44.5 43.8 42.8 41.5
Moderate impact scenario 47.5 46.5 44 42.7 41.9 40.9 39.5
Heightened impact scenario 47.5 46.5 42.6 43.9 44.2 43.7 42.8

The fiscal outlook presented in Budget 2022 respects a number of important fiscal sustainability metrics, including:

Compared to our international peers, the federal fiscal outlook and the better-than-expected provincial-territorial fiscal results position Canada to continue to have the lowest net debt-to-GDP ratio in the G7 (Chart 23), and the second-lowest deficit as a per cent of GDP among these same countries (Chart 24).

Chart 23
General Government Net Debt Forecasts, G7 Countries
Chart 21: Budgetary Balance

Notes: The internationally comparable definition of “general government” includes the central, state, and local levels of government, as well as social security funds. For Canada, this includes the federal, provincial/territorial, local and Indigenous government sectors, as well as the Canada Pension Plan and the Quebec Pension Plan.

Source: International Monetary Fund, October 2021 Fiscal Monitor.

Text version
  2023 2022 2021
Japan 168.3 169.2 171.5
Italy 137.9 138.5 142.2
France 102.0 100.9 103.3
United States 101.9 100.8 101.9
United Kingdom 97.8 95.2 97.2
Germany 51.6 52.9 54.4
Canada 30.1 32.5 34.9
Chart 24
General Government Deficit Forecasts, G7 Countries
Chart 24: General Government Deficit  Forecasts, G7 Countries

Notes: The internationally comparable definition of “general government” includes the central, state, and local levels of government, as well as social security funds. For Canada, this includes the federal, provincial/territorial, local and Indigenous government sectors, as well as the Canada Pension Plan and the Quebec Pension Plan.

Source: International Monetary Fund, October 2021 Fiscal Monitor.

Text version
  2023 2022 2021
United States 5.7 6.9 10.8
France 3.9 4.7 8.9
United Kingdom 3.6 5.6 11.9
Italy 3.5 4.7 10.2
Japan 2.1 3.9 9.0
Canada 0.5 2.2 7.5
Germany 0.4 1.8 6.8

Preserving Canada’s Low Debt Advantage: The Fiscal Anchor

The government’s fiscal anchor is unchanged: the federal government remains committed to unwinding COVID-19-related deficits and reducing the federal debt-to-GDP ratio over the medium term.

Budget 2022 once again meets this test. The government is winding down emergency COVID-19 expenditures and implementing a fiscal plan that ensures federal debt remains on a downward track as a share of the economy. This plan also effectively brings the deficit-to-GDP ratio back to its pre-pandemic track by the end of the budget forecast horizon (Chart 25).

Chart 25
Budgetary Balance
Chart 25: Budgetary Balance

Note: The forecast horizon in the 2019 Economic and Fiscal Update ends in 2024-25.

Source: Department of Finance Canada.

Text version
  2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27
Budget 2022 Outlook -1.7 -14.9 -4.6 -2.0 -1.4 -0.9 -0.6 -0.3
Budget Balance -39 -328 -114 -53 -40 -28 -19 -8
GDP 2,311 2,207 2,496 2,689 2,819 2,929 3,040 3,153
Actuals                
2019 Economic and Fiscal Update Outlook as published (Pre-Pandemic Fiscal Track) -1.2 -1.2 -0.9 -0.7 -0.6 -0.4    

The government’s continued commitment to its fiscal anchor will help ensure Canada’s low debt advantage and enviable  credit ratings are preserved and that future generations are not burdened with COVID-19-related debt.

Budget 2022 is taking critical steps to advance the government’s long-term objectives of (1) building a stronger and more resilient economy—one that generates shared prosperity, while (2) maintaining long-term fiscal sustainability. These objectives are mutually reinforcing, and the government will pursue them both as it works to build a more equitable future, for everyone.

Canada has a long history of prudent and sound fiscal management, along with several other strengths, such as economic resilience and diversity, effective policymaking and institutional frameworks, well-regulated financial markets, and monetary and fiscal policy flexibility. Together, these reinforce Canada’s stable economic and fiscal position.

These strengths continue to shape Canada’s excellent credit ratings from Moody’s  (Aaa), S&P (AAA), DBRS (AAA), and Fitch (AA+). All four rating agencies have reaffirmed Canada’s strong credit ratings.

Considering the government’s fiscal anchor and using Budget 2022 forecasts as a starting point, the government’s plan is fiscally sustainable for current and future generations. Indeed, over the three next decades, the federal debt-to-GDP ratio is projected to continuously decline and be on a steeper downward track than projected in Budget 2021 (Chart 26). Details and sensitivity analysis around these long-term fiscal projections are presented in Annex 1.

Chart 26
Long-Term Projection of the Federal Debt
Chart 26: Long-Term Projection of the Federal Debt

Notes: Rather than being viewed as a forecast, this long-term projection should be viewed as a modelling scenario based on a set of reasonable economic and demographic assumptions, assuming no future changes in policies. See Annex 1 for more detail.

Sources: Statistics Canada; Department of Finance Canada.

Text version
Budget 2022 Budget 2021
2015-16 31.87434 31.87434
2016-17 32.16632 32.16632
2017-18 31.35762 31.35762
2018-19 30.65964 30.65964
2019-20 31.21022 31.21022
2020-21 47.52416 47.52416
2021-22 46.50424 51.22998
2022-23 45.13849 50.65751
2023-24 44.47657 50.60765
2024-25 43.75139 49.96034
2025-26 42.76779 49.18967
2026-27 41.50313 48.51861
2027-28 40.36344 47.8743
2028-29 39.29394 47.28014
2029-30 38.33276 46.83134
2030-31 37.49501 46.52319
2031-32 36.74453 46.30035
2032-33 36.0462 46.13128
2033-34 35.38663 46.00551
2034-35 34.758 45.9089
2035-36 34.1452 45.83118
2036-37 33.511 45.7333
2037-38 32.84248 45.60913
2038-39 32.15245 45.45948
2039-40 31.43561 45.28289
2040-41 30.69685 45.08377
2041-42 29.93394 44.85801
2042-43 29.13887 44.6091
2043-44 28.31808 44.32487
2044-45 27.46963 44.00956
2045-46 26.59576 43.66605
2046-47 25.69843 43.28953
2047-48 24.77813 42.88103
2048-49 23.83589 42.44254
2049-50 22.86625 41.97845
2050-51 21.87515 41.49154
2051-52 20.86039 40.98029
2052-53 19.81567 40.44031
2053-54 18.74061 39.87223
2054-55 17.64257 39.28184
2055-56 16.52415 38.66954
Projected Public Debt Charges

By 2026, private sector forecasters expect the three-month treasury bill rate to increase by 200 basis points and the ten-year government bond rate to increase by 160 basis points, consistent with a global increase in yields across all markets. As such, this is already built into the baseline forecast. Despite this forecast trend and the sharp increase in the federal debt since COVID-19, federal public debt charges are projected to remain historically low, at $42.9 billion or about 1.4 per cent of GDP. This is well below the pre-financial crisis level of 2.1 per cent in 2007-08 (Chart 27).

Federal public finances would remain resilient even under higher-than-projected interest rates. For example, in a scenario where interest rates were 100 basis points higher than forecast in all years in this budget, public debt charges would rise by an additional $9.3 billion (0.3 percentage points of GDP) by 2026, bringing them to 1.7 per cent of GDP, which is still lower than at the end of the 2000s.

Chart 27
Historical Public Debt Charges as a Proportion of GDP, and Projected Sensitivity to a 100 Basis-Point Increase in Interest Rates
Chart 27: Historical Public Debt Charges as a Proportion of GDP, and Projected Sensitivity to a 100 Basis-Point Increase in Interest Rates

Source: Department of Finance Canada.

Text version
Year Public debt charges (historical) Public debt charges forecast Public debt charges forecast with 100 basis-point increase in interest rates
1971 1971-72 2.1
1972 1972-73 2.0
1973 1973-74 1.9
1974 1974-75 2.0
1975 1975-76 2.2
1976 1976-77 2.3
1977 1977-78 2.4
1978 1978-79 2.8
1979 1979-80 3.0
1980 1980-81 3.3
1981 1981-82 4.1
1982 1982-83 4.4
1983 1983-84 4.8
1984 1984-85 5.4
1985 1985-86 5.5
1986 1986-87 5.5
1987 1987-88 5.4
1988 1988-89 5.7
1989 1989-90 6.1
1990 1990-91 6.5
1991 1991-92 6.3
1992 1992-93 5.8
1993 1993-94 5.4
1994 1994-95 5.6
1995 1995-96 5.9
1996 1996-97 5.5
1997 1997-98 4.8
1998 1998-99 4.6
1999 1999-00 4.3
2000 2000-01 4.0
2001 2001-02 3.5
2002 2002-03 3.1
2003 2003-04 2.9
2004 2004-05 2.6
2005 2005-06 2.4
2006 2006-07 2.3
2007 2007-08 2.1
2008 2008-09 1.7
2009 2009-10 1.7
2010 2010-11 1.7
2011 2011-12 1.6
2012 2012-13 1.4
2013 2013-14 1.3
2014 2014-15 1.2
2015 2015-16 1.1
2016 2016-17 1.0
2017 2017-18 1.0
2018 2018-19 1.0
2019 2019-20 1.1
2020 2020-21 0.9
2021-22 1.0 0.0 1.0
2022-23 1.0 0.1 1.1
2023-24 1.2 0.2 1.4
2023-24 1.3 0.3 1.5
2024-25 1.3 0.3 1.6
2026-27 1.4 0.3 1.7

With higher interest rates, the government would also realize some offsetting benefits, including:

  • Higher revenues from the government’s interest-bearing assets;
  • Corresponding downward adjustments that reduce public sector pensions and employee benefit obligations; and,
  • Higher government tax revenues if interest rate increases were due to stronger economic growth.

5. Investing to Grow the Economy

Budget 2022 Makes Essential Investments Now

Canada has many of the essential building blocks it needs to be one of the most competitive economies in the world today, and for the years and decades to come. We have: a strong base of commodities and critical minerals that are in high global demand; abundant sources of clean energy; one of the highest rates of inward foreign direct investment in the G7; a growing population; high levels of fundamental research occurring in world-class universities and colleges; and a talented workforce that is among the most highly educated in the world. Canada boasts one of the fastest-growing employment bases for high-tech jobs, and with the right investments, has the potential to become a world leader in technology and innovation.

In the face of uncertainty, business investment can be paralyzed by a “wait-and-see” approach. But to succeed in an uncertain world, Canada must invest in its future now, or risk falling behind. Over the medium term, investments that expand Canada’s supply capacity will allow the economy to grow while mitigating future inflationary pressures.

Budget 2022’s investments in housing, immigration, and skills will be key to growing and maintaining a strong, diverse, and talented workforce. Investments in growth—including clean growth—and innovation will be central to building Canada’s industries and economy of tomorrow. And together, these investments will help build a resilient and sustainable economy that strengthens the middle class, and leaves no one behind.

Chart 28
Average Potential Annual Growth in Real GDP per capita, Selected OECD Countries, 2020-2060
Chart 28: Average Potential Annual Growth in Real GDP per capita, Selected OECD Countries, 2020-2060

Note: The 2020-2060 annual growth rate reflects the weighted average of growth for the 2020-30 and 2030-60 periods.

Sources: OECD (2021), "The Long Game: Fiscal Outlooks to 2060 Underline Need for Structural Reform"; Department of Finance Canada calculations.

Text version
New Zealand 1.3
Ireland 1.249077
Finland 1.174991
OECD 1.149963
Australia 1.124916
France 1.124916
Spain 1.1
Japan 1.074991
Italy 1.074768
Korea 1.073882
United States 1.049963
Netherlands 1.049963
Switzerland 1.049963
Sweden 1.024991
Norway 1.024916
Germany 0.874991
United Kingdom 0.874991
Canada 0.774991

The stakes are high. Most Canadian businesses have not invested at the same rate as their U.S. counterparts. Unless this changes, the OECD projects that Canada will have the lowest per-capita GDP growth among its member countries (Chart 28). By working to bring Canada’s projected growth rate up to the OECD average, we could add more than $4,000 (in 2019 dollars) to the annual income of the median family with children by 2030.

Investing in Long-Term Economic Growth

The government is committed to investing in the health of the Canadian economy and making life more affordable for Canadians. This means investments in areas like the transition to a low-carbon economy and business innovation that will increase productivity and help to contain inflation going forward.

Boosting the supply side of the economy is one of the key ways to mitigate inflation. Expanding the supply capacity of the economy requires investments that grow the labour force, improve workers’ skills and increase the stock of productive capital (buildings, machinery, equipment, software, intellectual property, etc.). Canada must prioritize such investments in order to surmount the fundamental economic challenges it faces over the longer-term.

It takes time before investment actually boosts economic supply. While investment may add to demand in the short-term, improved prospects for future supply will help to keep inflation expectations in check. This directly addresses the biggest threat to price stability today: the risk that elevated inflation becomes entrenched in expectations. When businesses expect that increases in their costs will be moderate, they do not feel the same need to raise prices to sustain profit margins.

The government has already made important supply-side investments. The investment in Early Learning and Child Care, which is expected to yield a material increase in labour-force participation, is one important example. Budget 2022 redoubles the focus on expanding supply capacity with investments to grow and maintain our talented and diverse workforce through immigration and skills development; facilitate the transition to a low-carbon economy; drive innovation and business growth; and make our cities more competitive by expanding the supply of housing.

Investing in a Green Transition That Will Support Jobs and Growth

Canada has among the highest per-capita greenhouse gas (GHG) emissions in the world (Chart 29). In part, this reflects the role that the resource sector plays in Canada’s economy, with the share of investment attributable to oil, gas, and mining being ten times the average of other G7 countries. Canada’s vast geography and seasonality also contribute to energy-intensive housing and transportation needs.

Carbon pricing is an important part of driving Canada towards a cleaner economy. But to reduce Canada’s emissions, and ensure our economy is competitive in an increasingly green world, significant investments are also needed, from both government and private capital. This includes investment in the development and usage of clean technologies that are needed to grow Canada’s supply capacity while reducing emissions. Leading into the pandemic, growth in Canada’s clean technology sector had been outpacing growth in the rest of the economy. Building on these strengths would allow Canada to prosper through the transition to net-zero and create good jobs. But uncertainty about how the global transition will unfold is hampering this investment. To address this, the government is taking action to help mobilize readily available private capital to invest in Canada’s capacity to ensure that Canada’s workers and businesses prosper in the green transition. The goals are both to achieve net-zero and to build the new low-carbon industries we will need as engines for future growth.

Chart 29
Greenhouse Gas Emissions per Capita
Chart 29: Greenhouse Gas Emissions per Capita

Source: Climate Watch, United Nations Framework Convention on Climate Change Annex I dataset.

Text version
Country/Region 1998 2008 2018
Australia 27.06 29.34 21.51
Canada 21.13 20.84 19.33
United States 22.69 21.28 18.07
New Zealand 11.12 11.85 11.32
Germany 12.76 11.64 10.03
Denmark 15.69 12.06 9.72
Japan 9.85 9.76 9.33
Finland 11.08 9.44 8.36
United Kingdom 12.71 10.48 6.86
Italy 9.3 8.94 6.48
France 8.97 7.49 6.37
Spain 7.72 8.17 6.33
Norway 7.9 5.83 5.34
Sweden 3.88 2.32 0.96

Investing in Our Economic Capacity and Security

While Canada and Canadians have benefited from higher rates of labour force participation and employment compared to our international peers, we have not done as well in keeping up with the changes in technology and innovation that improve productivity.

Labour productivity growth in Canada has slowed from about 2.7 per cent in the 1960s and 1970s to less than 1 per cent today. Technology has been a key driver of productivity and supply-driven economic growth. However, Canada has lagged behind other advanced economies in investing in and adopting new and innovative technologies (Charts 30 and 31). The rates of investment in Information and Communications Technology (ICT) equipment and R&D in Canada are only about half the U.S. levels.

Importantly, Canada is highly exposed to global economic developments, with trade as a share of GDP second only to Germany among G7 countries. This means investment in Canada is often aimed at producing for the global market. In recent years, trade and geopolitical tensions have strained the rules-based global trading system. Ensuring stable trade relations will continue to be important for investment in Canada. At the same time, an uncertain world creates opportunities for a stable democracy like Canada to supply energy and other critical goods to the world.

In response to recent developments and emerging opportunities in the global economy, the government will act to improve business investment in innovation and technology and help Canadian businesses to grow and strengthen Canada’s critical supply chains, and its ability to produce strategic commodities.

Chart 30
Business Expenditures on Research and Development as Share of GDP, G7 Countries, Average 2015-19
Chart 30: Business Expenditures on Research and Development as Share of GDP, G7 Countries, Average 2015-19

Sources: OECD Main Science and Technology Indicators; Department of Finance Canada calculations.

Text version
BERD as a percentage of GDP
Italy 0.86
Canada 0.88
United Kingdom 1.14
France 1.44
Germany 2.10
United States 2.10
Japan 2.52
Chart 31
ICT Hardware, Software, and Database Investment as Share of GDP, G7 Countries, Average 2015-19
Chart 31: ICT Hardware, Software, and Database Investment as Share of GDP, G7 Countries, Average 2015-19

Notes: ICT is Information and Communications Technology. Average share between 2015 and 2019. Calculations based on constant dollar values of investment and GDP.

Sources: OECD Annual National Accounts; Department of Finance Canada calculations.

Text version
  Software & Database ICT
Germany 0.77543 0.701876
Canada 1.270424 0.96655
Italy 1.551917 0.73549
United Kingdom 1.792442 0.679921
Japan 1.876646 1.30921
France 3.140686 0.528907
United States 2.487821 1.686607

Investing in an Inclusive Workforce

While the government’s COVID-19 economic response plan has been successful in getting Canadians back to work, over the long term, population aging may weigh on labour force growth and the economy’s capacity to supply goods and services. It will, therefore, become critical to improve labour market participation of under-represented segments of the population (Chart 32).

The government’s significant investment in early learning and child care is a major step in this direction and it is expected to result in a marked improvement in labour market participation by women with children. The evidence from Quebec—which began building a universal early learning and child care network in 1997—is clear. In 1997, the women’s labour force participation rate in Quebec was 4 percentage points lower than the rest of Canada. Today it is 4 points higher than the rest of Canada.

Immigration will be another key driver of workforce growth in Canada. Already, more than one in four workers are foreign-born. As the Canadian population ages, immigration is expected to account for an increasingly large share of the labour force (Chart 33).

Chart 32
Gap in Labour Force Participation Relative to Men, Selected Groups, 2021
Chart 32: Gap in Labour Force Participation Relative to Men, Selected Groups, 2021

Note: Participation rates for 2021, except for Canadians with disabilities (2017). Recent immigrants are those who came to Canada in the last five years. Indigenous Canadians only includes those living off reserve and in the provinces. 25-54 years of age for all.

Sources: Statistics Canada; Department of Finance Canada calculations.

Text version
Persons
with
disabilities
-19.2
High
school
or less
-13.3
Indigenous
Canadians
-10.8
Recent
immigrants
-8.3
Women -7.6
Chart 33
Foreign-Born Share of Labour Force, 2000-2035
Chart 33: Foreign-Born Share of Labour Force, 2000-2035

Note: The projection is based on the medium-growth scenario.

Source: Martel, L. (2019), “The Labour Force in Canada and Its Regions: Projections to 2036,” Statistics Canada; Department of Finance Canada calculations

Text version
Foreign-born Share of Labour Force
2000 19.7
2005 20.9
2010 22.9
2015 25.2
2020 28.2
2025 29.7
2030 32
2035 33.8
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