Having several nicknames, such as The Great White North, The True North, and The Land of Maple, Canada is a country with stable economy in the world, being considered as one of the top ten. Having abundant natural resources and continuous supportive relations with the United States, Canada is a developed country that is considered very generous because it has accommodated immigrants from various countries. For people from developing countries, Canada is a very strategic country to try their luck and look for work with a better quality of life. Not only that, Canada is also one of the countries with the highest ethnic diversity, so many immigrants tend to not worry about racial disparities or abuse. Being part of many international organizations, such as NATO, G20, The United Nations, and many more has made Canada’s credibility very promising for other countries in establishing international cooperative relations. International trade is one of Canada’s main sources of income, with exports in natural resources as major supporting factor.
Despite Canada’s achievements and tremendous public image, turned out that this country is experiencing a very complicated economic crisis, and many news stated that Canada has undergo major recession in 2023. In this article, let’s dissect one by one the decline that Canada is experiencing, from food inflation, rising house prices, lack of foreign investment,and the implementation of a carbon tax.
Food Inflation
With food prices soaring from 2023 to now, Canada has begun to stabilize this crisis, with food price growth of 3.4% in January and decreasing to 1.9% in March based on the CPI (Consumer Price Index ) Reports. Many countries are still trying to recover from the catastrophy caused by the Covid-19 pandemic, Canada has not been spared from this disaster which has affected their food inflation. Not only that, global supply chain issues caused by Russia-Ukraine war, the decline of the Canadian currency against the US dollar, and extreme climate change have supported this inflation.
This concern is also related to the higher number of immigrants that causes house prices to increase very rapidly. But food supply in Canada deteriorates mainly because of the pandemic. During those times, trade between states were lacking in many factors, causing the supply chain to be disrupted and altering consumer behaviors. Particularly for commodity like meat and produce experience very rapid increase which not many people could afford. In 2022 that continued for 2 years, the food inflation was at a staggering level which is 9%, the highest inflation compared to previous years which sits at only 3%. But luckily now, Canada has been able to overcome this issue since trade between states has gone smoother with shipping costs begin to return to normal rates. Food supplier costs starting to decrease which makes food inflation starting to go back to normal.
Rising House Prices
Known for its immersing diverse immigrant population, Canada has been known as promising country to purse a better life quality for those developing countries. But the issue of rising house prices is mainly caused by unevenly distribution between its local people and the immigrants. The increasing numbers of immigrants entering Canada are mainly coming from India, Philippines, Pakistan, Nigeria, and also United States. Most Filipino came to Canada and mainly works as caregivers and healthcare-related professions, while Pakistanis contributing to various fields such as technology, medicine, and academics. Nigerian immigrants brings a quite diverse skills while the intriguing immigrants from United States often seeking opportunities to work or education, which triggers quite a few Canadians.
As of those, the house prices have increased very rapidly mostly in urban centers like Montreal, Vancouver, and Montreal. This was caused by several factors, such as:
Supply and Demands: Driven by population growth, immigration, and urbanization have often outpaced the supply of available homes, leading to bidding competition which pushing prices to go higher. Many college students in Canada is often sleeps in their car while they wait for any houses to be available at such affordable price, which they say is very rare to happen.
Low Interest Rates: The Bank of Canada have kept an interest rate in low levels, which makes them to borrow more affordable and stimulating demand for real estate.
Government Policies: Foreign buyer taxes policy and stricter mortgage regulations have been implemented in some areas to cool the housing market and address the concerns of affordability.
Speculative Activity: Real estates has been perceived as an attractive investment, which leads to speculative activity in certain markets, and this issue often drives up the house prices to go more higher.
Lack of Foreign Investment
Canada known as a country that is rich on its oil and gas, mining, and forestry sector which can be utilized and attract many investors. However, due to fluctuations in commodity prices and challenges in regulatory often affects foreign investments to enter. This could be part of their resource nationalism or politic protectionism policy. Not only oil and gas, real estates often attracts foreign investments as well, while experiencing turmoils over the years. To address this concerns, some jurisdictions have implemented measures such as foreign buyer taxes. For the past few years, Canada also have been working on its technology and innovation sector to attract more investment coming in, but many observe that Canada may lag behind others countries in terms of venture capital and high-tech investment. Talking about its regulatory investment, Canada may deter investment in various factors, such as bureucracy, taxation, and uncertainty around major projects. This country also facing competition that caused by trade policies, geopolitical tensions, and economic instability that makes foreign investments hesitant to enter.
The Implementation of Carbon Tax
Ever since the carbon tax has been implemented in Canada, it has triggered various concerns and debates that highlights potential downsides, such as:
High Level of Competition: Many industries that have emitts greenhouse gases may facing higher production costs due to this carbon tax. This has the potential of making Canadian businesses to be less competitive in international scale, especially with countries that implement same mechanism. This refers to carbon leakage, where emissions-intensive industries relocate to jurisdictions with more relaxed environmental regulations.
Cost of Living: Many Canadians concern that this carbon tax could increase the cost of living since businesses may pass on the costs of the carbon tax to consumers which leads to higher prices for goods and services. Households could experience difficulties from the increased expenses for prime necessities such as food, transportations, and heating.
Uneven Regional Effect: Certain regions in Canada have different regulations than the others. Simply put, they varies. This caused regions to have different economic structures which rely on various energi sources. Many critics pointed out that the carbon tax may disproportionately impact certain regions, especially with those that has resource-dependent economy.
Impact on Jobs: Critics argue that industries subject to carbon tax would reduce their production or relocate operations which can cause job losses in certain sectors of the Canadian economy.
Efficacy and Fairness: The carbon pricing to reduce greenhouse gass emissions have triggered the effectiveness and fairness in the country’s economy. People often questioning whether a carbon tax alone can achieve significant emissions reductions without complimentary policies and whether it could places burden on certain segments of the population, such as low-income households.
After all, the implementation of carbon tax is important in combating climate change. But regulations must be applied the same to all regions and its people should be evenly prepared and ready to implement it. This carbon tax also could drive businesses and consumers to transition to cleaner energi sources and technologies, making a better life in the future for all.
Many countries experience several turmoils in the economy, especially post pandemic condition. Canada is among them and now continuing to revive, working their best regulations possible while also putting more attention to combating climate change and making better future for its people. Let’s hope that Canada could continue to boost and escalate their economic condition from every layer and every sectors possible.
