Economic Studies
Canada

Canada

Population 35.5 million
GDP per capita 50,304 US$
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Synthesis

major macro economic indicators

  2013 2014  2015  2016 (f)
GDP growth (%) 2.2 2.5 1.1 1.5 
Inflation (yearly average) (%) 0.9 1.9 1.1 1.8
Budget balance (% GDP) -1.9 -0.5 -1.7 -2.2
Current account balance (% GDP) -3.2 -2.3 -3.3 -3.5
Public debt (% GDP) 86.1 86.2 91.5 92.3

 

(e) Estimate   (f) Forecast

STRENGTHS

  • Abundant and diversified energy resources
  • Fifth largest producer of oil and gas in the world
  • Dynamic population growth (migration inflows)
  • Solid banking sector, well capitalised and strictly supervised

WEAKNESSES

  • High degree of openness and heavy dependence on the US economy
  • Insufficient R&D spending
  • Manufacturing industry’s loss of competitiveness linked to rising power of emerging competitors
  • High level of household debt
  • Weakening of energy exports (natural gas resources in the United States)
  • Inadequate gas pipeline infrastructures 

RISK ASSESSMENT

Domestic demand would support activity despite downside risks

In 2015, growth slowed significantly because of the decline in investment in the oil and gas sector following the reduction in revenues and profits in the sector, a consequence of the fall in oil prices. Activity should slightly pick up in 2016. Household consumption will be more vigorous, driven by higher wages and property prices and this, despite very high debt levels (165% of gross disposable income) and low savings rates (4.2% of gross disposable income). The expansionary monetary policy of the Bank of Canada is expected to provide an additional boost to household consumption, as well as property investments. This latter and public investment are therefore likely to increase, whilst non-residential investments will not help boost economic activity given the low price of oil (the oil price needed to match Canadian production costs is around $65/barrel, higher than the current price).

Alberta, and to a lesser extent Saskatchewan, have been strongly affected by Fort McMurray wildfires in May 2016 while 60% of Canadian annual oil production is derived from this Province. The impact should nonetheless be limited on the whole year due to rebuilding efforts and new fiscal measures came into force in July 2016 (increase of the child tax benefit).

The principal downwards risks are from a continuation in low oil prices and a property market price correction, which would hit residential investment and household consumption.

 

Fiscal measures adopted by Prime minister would widen public deficit

The government plans to spend $60 billion over ten years in infrastructure projects to stimulate economic activity. The first phase of this plan should be completed in 2019 and plans $10 billion investments in public transport network and both green and social infrastructure projects have been launched, in particular in Alberta, British-Colombia and Quebec. Details of the second phase will be announced in 2017. Measures aimed at precarious populations, in particular the unemployed and families have also been implemented. In terms of revenues, the government intends to reduce taxation for those earning least. The deficit is therefore set to increase in 2016 under the dual impact of spending (increased) and receipts (down, amplified by the oil effect). The public debt should therefore increase. At the level of the provinces, Quebec and Ontario, the two most heavily indebted provinces, representing 60% of GDP, two-thirds of the population and over half of its exports, are likely to continue with their budgetary control.

 

The deterioration of the terms of trade in 2015 increased the current account deficit. This latter should anew slightly increase in 2016 due to less dynamic exports caused by the exchange rate appreciation against the dollar and the turnaround point reached by the US economy (77% of Canadian exports go to US market), insomuch as domestic demand’s increase should support imports. Besides, income balance should remain in deficit.

 

The Liberal Party wins October 2015 parliamentary elections

Justin Trudeau was elected Prime Minister of Canada in the last parliamentary elections in October 2015, taking over from the conservative Stephen Harper, who held the post for almost ten years. Trudeau’s Liberal Party (centre-left) won 184 of the 338 seats in parliament, giving it an absolute majority. Nearly a year after his appointment, Trudeau’s government enjoys high popularity both nationally and internationally. Both diplomatic and trade relations have therefore strengthened with many countries (Mexico, Ukraine…) since Trudeau took office.

Finally, the business climate is eased by the simplicity of starting a business and of obtaining credit and the low level of taxes.

 

Last update: July 2016

A heritage of its  colonial past, Canada has a dual legal system:

-          a system inspired by British “common law” and used by nine of the ten provinces making up the Federal state,

-          Another system used by Quebec whose legal traditions are based on the codified principles of the Code Napoleon.

 

Lower Canada’s civil code, dating from 1st August 1866, was completely revised and implemented on 1st January 1994 as the Quebec Civil Code.

 

Under the British North America Act of 29 March 1867,Canadawas the first British colony to exercise executive and legislative powers as a federal state.

The Confederation of Canada came into effect as a dominion on 1st July 1867.

 

Payments

 

A single law governs bills of exchange, promissory notes and cheques throughoutCanada; however this law is frequently interpreted according to common law precedents in the nine provinces or according to the civil code inQuebec.

As such, sellers are well advised to accept such payment methods unless where long-term commercial relations, based on mutual trust, have been established with buyers.

 

Centralised accounts, which greatly simplify the settlement process by centralising settlement procedures between locally based buyers and sellers, are also used withinCanada.

 

SWIFT bank transfers are the most commonly used payment method for international transactions. The majority of Canadian banks are connected to the SWIFT network, offering a rapid, reliable and cost-effective means of payment, notwithstanding the fact that payment is dependent upon the client’s  good faith insofar as only the issuer takes the decision to order payment.

 

A real time electronic fund transfer system in operation since February 1999 – the Large Value Transfer System, or LVTS introduced by the Canadian Payments Association – facilitates electronic transfers of Canadian dollars countrywide and can also handle the Canadian portion of international operations.

 

The letter of credit (L/C) is also frequently used.

 

Debt Collection

 

Canada’s Constitution Act of 1867, amended in April 1982, divides judicial authority between the federal and provincial Governments.

 

Therefore, each province is responsible for administering justice, organising provincial courts and enacting the civil procedure rules applicable in its territory. Though the names of courts vary between provinces, the same legal system applies throughout the country, barQuebec.

 

Within each province, provincial courts hear most disputes of all kinds concerning small claims, and superior courts hear large claims – for example, theQuebecsuperior court hears civil and commercial disputes exceeding 70,000 Canadian dollars (CAD) and jury trials of criminal cases. Canadian superior courts comprise two distinct divisions: a court of first instance and a court of appeal.

 

At federal level, the Supreme Court of Canada, in Ottawa, and only with “leave” of the Court itself (leave is granted if the case raises an important question of law), hears appeals against decisions handed down by the provincial appeal courts, or by the Canadian Federal Court (stating in appeal division), which has special jurisdiction in matters concerning maritime law, immigration, customs and excise, intellectual property, disputes between provinces, and so on.

 

The right of final recourse before the Privy Council, inLondon, was abolished in December 1949.

 

 

The collection process begins with the issuance of a final notice, or “seven day letter”, reminding the debtor of his obligation to pay together with any contractually agreed interest penalties.

 

Ordinary legal action – even if the vocabulary used to describe it may vary within the country – proceeds in three phases.

 

Firstly, the “writ of summons” whereby the plaintiff files his claim against the defendant with the court, then the “examination for discovery”, which outlines the claim against the defendant and takes into account the evidence to be submitted by each party to the court and, finally, the “trial proper” during which the judge hears the adverse parties and their respective witnesses, who are subject to examination and cross-examination by their respective legal counsels, to clarify the facts of the case before making a ruling.

 

In most cases, except when the judge decides otherwise, each party is required to bear the full cost of the fees of his own attorney whatever the outcome of the proceedings. As for court costs, the rule stipulates that the winning party may demand payment by the losing party based on a statement of expenses duly approved by the court clerk.

 

The Quebec civil code reform, in effect since 1st January 2003, is intended to speed up and foster, by devolving a broader role for the court, smoother court proceedings.

 

The change precisely concerns institution of a standard “originating petition” (requête introductive d’instance), with the payment of judicial costs joined, introducing a 180-day time limit by which the proceedings must be scheduled for “investigation and hearings” (pour enquête et audition), delivery of a judgement on the content within a timeframe of six months after the case was heard and encouragement of the parties to submit to a conciliation stage during legal proceedings, with the judge presiding over an “amicable settlement conference” (conférence de règlement à l’amiable).

 

In February 2014, Bill 28, an Act establishing the new Civil Procedure, was passed by the National Assembly. It provides “accessibility, quality and promptness of civil justice” and promotes “exercise of the parties’ rights in a spirit of cooperation and balance”.

The court also will have the task of encouraging conciliation or mediation between the parties.

Insolvency trend Canada
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