4741. Economic survey of Canada, 2003
- Publication Date:
- 09-2003
- Content Type:
- Policy Brief
- Institution:
- The Organisation for Economic Co-operation and Development
- Abstract:
- Canada's economy has done comparatively well over the past two years, demonstrating a noticeably improved resilience to unfavourable shocks. Over the medium term the economy is poised to achieve growth rates that compare favourably with past performance, but that will not be enough to eliminate the per capita income gap with the United States. The fundamental challenge is to make Canada an even more attractive place to live, work and invest. While past reforms have begun to pay off, there is still unfinished business. To boost the employment rate further the government should reduce disincentive effects arising from the tax and benefit systems by, for example, making greater use of in-work benefits and reintroducing experience rating of Employment Insurance users. Faster productivity gains are more likely to be achieved in an economic environment conducive to innovation. A key to greater dynamism is strengthening competition by eliminating remaining foreign ownership limits and barriers to internal and external trade and continuing electricity deregulation. Investing in skills should also remain a priority, with a particular emphasis on adult education. The nation has benefited by importing human capital from abroad through immigration but needs to intensify its efforts to remove the obstacles that prevent immigrants from having their skills fully utilised in the labour market. Having introduced a sound fiscal framework and reformed its public pension system Canada is in a better position than most other countries in facing ageing-related fiscal challenges, but the trend rise in health-care costs remains a risk. With the recent budget the government chose to address the short-term needs of the existing system. But, ultimately, ways to control the rise in budgetary costs - whether through incentives to raise efficiency or through cost sharing - will need to be explored, otherwise the resources needed to finance the future burden should be set aside in advance, for example by setting a bolder debt reduction target. Finally, environmental sustainability will be enhanced with least cost to the economy if the ambitious greenhouse gas emissions reduction is achieved through market-oriented instruments rather than command and control measures or voluntary agreements.
- Topic:
- Diplomacy, Economics, International Organization, International Trade and Finance, and Political Economy
- Political Geography:
- United States and Canada