New report explores economic challenges facing next federal government
THE REAL ECONOMY
The third edition of ‘The Real Economy: Canada’ explores the economic and political tensions facing the country’s next government and looks at measures it could take to boost Canada’s economy
RSM Canada ("RSM"), the leading global provider of audit, tax and consulting services focused on middle market businesses, today launched its third edition of ‘The Real Economy, Canada’ – a quarterly report that provides Canadian businesses with economic analysis and insights into factors driving growth in Canada's middle market.
With the federal election due in October, many businesses will be looking for insight into the economic and industry challenges facing the next government, with questions around what this means for them. The third edition of ‘The Real Economy: Canada’ shines a light on the increasing headwinds facing Canada in the coming months and explores the measures the next government needs to put in place to re-ignite the country’s economy.
Key findings in this quarter’s report include:
Canada’s economy is slowing due to geopolitical tensions and trade wars, and its strong GDP performance is deceptive.
- U.S. tariffs on foreign economies such as China in 2018 kick-started a sense of hesitation around the world. Compounded with political tensions such as Brexit, this has had a ripple effect on spending and growth.
- Canada’s latest rate of 3.7% will be temporary. The reality is that the annual measure of GDP has been declining since 2017.
The slowdown in global manufacturing is now hitting one of Canada’s vital industries.
- The manufacturing sector contributes to 10% of Canada’s industrial output, however with global manufacturing industries such as Germany and the U.S. in a recession, Canada is now feeling the side effects.
- Manufacturing in Canada has had its own struggles since 2018 due to lower demand for Canadian energy resources, and buyers finding alternate sources.
The appetite for Canadian energy and commodities has declined.
- Extraction of resources are also vital to Canada’s economy – 7.8% of GDP, and 90% is exported to the U.S., however this has also been in decline since 2018 due to lower demand for Canadian energy resources, with buyers finding alternate sources.
- RSM Canada’s Financial Conditions Index also shows increased levels of risk in the commodities market.
The next Canadian government will need to implement a set of measures to get the country back on track.
- There are four main measures that could be adopted to give the economy a boost:
1. Adjustments to employment insurance
2. Individual tax relief, credits & rebates
3. Business tax incentives
4. Increase in government spending (such as infrastructure projects)
- RSM’s research shows that progressing with the hotly debated ‘Trans Mountain Expansion Project’ would provide a short- and long-term productivity boost that Canada needs – it has the potential to generate a GDP increase of $164 billion and create 40,000 jobs across Canada – half of which would go to SMEs.
“With the federal election due in October, Canada’s next elected party will face a mighty economic task on its first day – boosting the country’s slowing economy in the midst of global uncertainty,” said Joe Brusuelas, chief economist with RSM US LLP. “The country is grappling with a worldwide slowdown, all facilitated by geopolitical tensions and trade wars, and the implications are hitting Canada’s most prominent industries hard. It’s vital that the incoming government implements the right measures to get the country back on its feet, providing a well-needed boost to infrastructure, businesses and communities.”
“Aside from adjustments to credits, insurance and tax, the Trans Mountain Expansion Pipeline is one investment that would provide the short-and long-term economic boost the country needs,” said Alex Kotsopoulos, vice president, projects and economics with RSM Canada:. “Our research shows that developing the pipeline project would not only increase Canada’s GDP but, most importantly, it would support the backbone of Canada’s economy – its small-to-medium-sized businesses - through job creation and community investment.”
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