Canada has weathered the price crash in oil and other commodities better than some other resource-dependent countries, the Organization for Economic Co-operation and Development (OECD) says in a report on the national economy released Monday.
But a carbon price and investments in a more integrated energy grid will be key measures to “boost productivity, reduce financial stability risks, and make future growth stronger, greener and more inclusive,” the OECD states.
A sharp drop in investment and employment in the oil sector, together with declines in commodity prices, “temporarily depressed economic growth in 2015,” the OECD reports. “Output has fallen sharply in industries most affected by commodity prices but has risen in the rest of the economy, especially in export-related industries, allowing new job creation to re-employ displaced workers.”
“The Canadian economy is proving resilient, but continues to face headwinds from the low growth trap facing the global economy,” OECD Secretary-General Angel Gurria said in Montreal, where the report was released.
Gurria endorsed Canada’s “economic policy settings” as “appropriate, given the risky international environment.” Nonetheless, he added, “there is still scope for reforms to boost competition, stimulate business dynamism, and ensure better economic outcomes for all Canadians.”
Among the reforms his organization is urging on Canadian governments is the prompt establishment of a price on carbon emissions everywhere in the country. In keeping with its trade-oriented perspective on raising productivity, the think tank also recommend “harmonizing” of interprovincial regulatory trade barriers.
“Barriers to competition in fragmented electricity markets could be reduced through development of new east-west interconnections,” the report notes. “Liberalization of the generation and distribution sectors would encourage wholesale and retail competition in jurisdictions that have not done so yet.”
The OECD predicts Canada’s GDP will grow 1.7% this year, speeding up to 2.2% next year as the economy moves away from fossil- and commodity-based activity.