Urgent Action Needed as Canada-US Economic Divide Hits 100-Year Peak, Economist Warns
Recent economic data reveals a growing disparity between Canada and the United States, with Canada’s economy falling behind its southern neighbor at an unprecedented rate. According to an analysis by economist Trevor Tombe, the gap in economic performance between the two countries has reached its widest point in nearly a century.
Statistics Canada reported that Canada’s real GDP per capita declined by 0.1% in the second quarter of 2024, marking the fifth consecutive quarter of decline relative to population growth. This contrasts sharply with the US, where real GDP per capita grew by 0.6% in the same period.
The divergence becomes more stark when viewed over a longer timeframe. Compared to 2022, Canada’s per capita GDP has fallen by 3.6%, while the US has seen a 4.5% increase. Tombe estimates that if Canada had kept pace with US growth over the past two years, its economy would be 8.5% larger, translating to approximately $6,200 more annual income per Canadian.
Looking at 2024 projections based on OECD data and IMF outlooks, Tombe anticipates that US real GDP per capita will surpass Canada’s by nearly 50%. This level of disparity hasn’t been seen since 1945, excluding periods of global upheaval such as the World Wars and the Great Depression.
The economic slowdown isn’t just affecting Canada’s standing relative to the US. For the first time since at least 1970, Canada’s real GDP per capita is expected to fall below the OECD average in 2024, reversing decades of above-average performance.
While some Canadian provinces are faring better than others, even the strongest performers lag behind many US states. Alberta and Newfoundland and Labrador have seen their rankings slip, while Saskatchewan and British Columbia have shown some improvement.
Tombe argues that addressing this growing prosperity gap requires urgent and bold action from Canadian policymakers. He emphasizes the need for a renewed focus on improving productivity and overall economic performance to narrow the gap with the US and regain Canada’s competitive edge among OECD nations.
“Given the historically unusual situation we find ourselves in, bolder action than we’re used to seeing from Canadian governments might be needed. And needed soon,” Tombe warns, adding that the gap will just get bigger the longer Canada waits.
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