Canada Country Report

February 2020

Main economic developments

Subdued growth expectations in 2020

As in 2019, Canada ́s GDP growth is expected to remain below its long-term trend in 2020 due to sluggish domestic demand and lower export growth. While private consumption is sustained by a robust job market and wage growth, high levels of household debt continue to weigh on consumer spending. The federal government has already enacted a tax cut for the middle class and is expected to increase spending, however most provincial governments will maintain a high degree of spending restraint. Global economic uncertainty and ongoing trade tensions continue to dampen business sentiment and investment activity in most sectors, apart from the energy industry.

Export growth is hampered by the slowdown in the US as Canada ́s main export market. The closure of a large automotive assembly plant in Oshawa in December 2019 will have an impact, as cars and car parts are Canada ́s largest non-energy exports. The new US-Mexico-Canada Agreement (USMCA) has reduced trade policy uncertainty in North America. Together with Mexico, Canada is shielded from any global tariffs on cars the US might impose on national security grounds by means of a tariff-free quota well above current export levels.

The insolvency environment

Insolvencies increase again in 2019 and 2020

Due to the modest economic growth and increased business uncertainty corporate bankruptcies are expected to increase 6% in 2019 and 2% in 2020 after several years of annual decreases.