Paris, France - Canada has experienced solid economic growth since the most recent global economic crisis, allowing it to reverse recession-induced job losses and put federal public finances on a sound footing, says the Organization for Economic Cooperation and Development (OECD). Growth is expected to accelerate from 2.5% this year to 2.7% in 2015.
Despite the overall positive outlook, important challenges remain to ensure strong, inclusive growth going forward and preserve Canada’s high levels of well-being, according to two new OECD reports.
High housing prices in certain large cities and household debt pose financial stability risks that should be addressed. Fiscal consolidation should continue as planned at both the federal and provincial levels, with a particular focus on long-term health costs at provincial level. Efforts must be taken to protect the environment while saving a greater share of resource revenues for future generations, and further action is needed to ease localised and sector-specific skills shortages.
Presenting the Economic Survey of Canada at the 20th International Economic Forum of the Americas/Conference of Montréal in June 2014, OECD secretary-general Angel Gurría said: “Canada weathered the global crisis well and has out-performed most other advanced economies since the Great Recession. Economic growth will accelerate in the years to come, but skills shortages in some sectors and regions must be addressed to avoid constraining growth going forward.
“The exploitation of non-renewable resources must be carefully managed, both to minimise negative environmental impacts today and to ensure a better tomorrow for future generations,” Gurría said.
The Economic Survey of Canada recommends policymakers move to reduce housing market risks. It calls for a tightening of mortgage insurance, so as to cover only part of lenders’ losses in case of mortgage default, and a continuing increase in the private sector’s share of the market through gradual reductions of the cap on the Canada Mortgage and Housing Corporation’s insured mortgages.
The Survey also recommends that Canada expand low-cost rental housing supply at the municipal level, notably by adjusting zoning regulations to promote the construction of more multi-unit dwellings.
The OECD calls for further efforts to improve fiscal sustainability. The federal government has made considerable progress in reducing its budget deficit and is encouraged to stay the course to achieve its objective of eliminating the deficit by 2015. Nevertheless, provincial governments will see rising debttoGDP ratios over the next few years without further action. Health care costs pose the most serious threat to provincial fiscal sustainability over the longer term and should be addressed through reforms, including patient or activitybased funding for hospitals, increasing the share of ambulatory care and joint input purchases with other provinces.
Align student studies to job requirements
To reduce localized and sector-specific skills shortages, the Survey calls for continued efforts to improve labour market information, in order to bring students’ study choices more into line with labour-market requirements. It also recommends harmonising apprenticeship certifications across the country, so as to increase completion rates by boosting inter-provincial mobility for apprentices.
The Employment and Skills Strategies in Canada – OECD Review on Local Job Creation says that greater local-level involvement in the implementation of employment and skills policies is vital to align skills development efforts with employers’ needs. The report analyzes policies in Canada’s two largest provinces, Ontario and Quebec, and makes recommendations on how to better connect employment, skills and economic development.
The OECD shows that stronger linkages with employers, as well as flexibility in the design and implementation of policies, are required to ensure communities can retain and attract highly skilled workers and jobs.
Greater attention by the education, training and employment systems to how skills are utilised in the economy would stimulate productivity and innovation, long identified as among Canada’s greatest challenges, while addressing skills mismatches and helping create quality jobs. This would also mitigate the decline in labour supply likely to emerge as the workforce ages. The federal government can promote a ‘place-sensitive’ approach by considering how policies are implemented at the local level, and by encouraging provinces to take an integrated approach on the ground.
An overview of the Economic Survey of Canada is available at: www.oecd.org/eco/surveys/economic-survey-canada.htm.