Canada

Canada: very oil-dependent

As a major oil-exporter, Canada was hit hard by low oil prices, with GDP growth slowing down and the Canadian dollar losing about a third of its value. In 2016, the EPI projects Canada to have a performance score of 91.9%, or a B grade.

The energy sector contributes significantly to Canada’s economy, with the oil, gas and mining sector accounting for more than one quarter of the value of the country’s GDP. Valued at $259 billion in 2014, natural resources account for more than half of Canada’s merchandise exports. The US (78%), the UK (5%) and China (4%) are the three main destinations of all natural resources exports. The U.S. is the destination of 97% of energy exports, 66% of forest products exports and 52% of minerals and metals exports.

GDP growth slowed from 2.4% in 2014 to 1% in 2015 and is projected to be 1.7% in 2016, mainly because of large investment drop in the energy industries. Still, Canada’s economic fundamentals remain strong, with the country’s strong commitment to open-market. The newly elected government is likely to use fiscal stimulus to decrease the pain of the oil shock. But the budget deficit is still projected to remain close to 15% in 2016. Unemployment is projected to be 6.8% and inflation to be low at 1.6% in 2016.

The 5-Minute Economist projects Canada’s EPI score to stay at a B level by 2020, with gradually increasing inflation compensated by improved GDP growth.