MOVING UP In The World, As Rivals Fall

[Bianca]

                                                       Moving up in the world as rivals fall
 


                                     Canada's economy is on the mend, says the Conference Board



                     Canada climbs ranks because the recession is exacting a deeper toll on other countries







Aug 14, 2009
RITA TRICHUR
BUSINESS REPORTER
THE STAR

Canada is expected climb the rankings of international economic performance this year and next because the global recession will exact a deeper toll on other industrialized countries, says a report by the Conference Board of Canada.

The Ottawa-based research organization's report card, released yesterday, compares the expected economic performance of the world's 17 richest countries based on data from the Paris-based Organisation for Economic Co-operation and Development.

Canada, which scored a low B grade and an 11th place ranking in 2008, will move up to a solid B and 6th place as its economy transitions out of the recession this year. Its relative position will improve again in 2010 when it notches a B plus, while moving into 5th place. The main drivers will include improvements in gross domestic product, employment growth and the unemployment rate, the report said.

The OECD's real GDP forecast for Canada includes a 2.6 per cent contraction in 2009, followed by 0.7 per cent growth in 2010. Canada, however, is expected to exceed the 17-country average of negative 4.1 per cent and positive 0.6 per cent for '09 and '10, respectively.

Canada's employment is expected to diminish by 1.9 per cent in 2009 and by 0.4 per cent in 2010. The corresponding 17-country averages for those years are negative 2.3 per cent and minus 1.2 per cent.

Conversely, Canada's unemployment rate will exceed the 17-country average for both years, averaging 8.6 per cent this year and 9.8 per cent in 2010. Next year, countries like Norway (4.3 per cent), Switzerland (5.1 per cent), and Japan (5.7 per cent) will have lower jobless rates than Canada.

Overall, though, Canada is expected to weather the global recession better than many countries because it entered the downturn in a "relatively healthier" economic position, while its banking sector remains sound, said Glen Hodgson, senior vice-president and chief economist at the Conference Board.

"But achieving a higher rank because other countries are falling farther is not the basis for sustainable prosperity," he said. "Some of Canada's fundamentals, such as labour productivity, remain weaker than those of the global leaders."

If Canada is serious about becoming "an A performer" it has to focus on improving productivity or output per worker. Productivity is not just a matter of working harder, Hodgson said. "It truly is producing more for every hour of work."

There being "no silver bullet," the private and public sectors should invest more in training, machinery and innovation, he added. If not, lagging productivity eventually becomes a drag on economic growth and limits the government's ability to raise revenue through taxes.

"Therefore, we're going to have a real pressure on the things that we value as Canadians," Hodgson said.