2019 Index of Economic Freedom

Canada

overall score77.7
world rank8
Rule of Law

Property Rights87.0

Government Integrity84.6

Judicial Effectiveness69.4

Government Size

Government Spending51.3

Tax Burden76.8

Fiscal Health83.1

Regulatory Efficiency

Business Freedom81.9

Labor Freedom73.7

Monetary Freedom77.2

Open Markets

Trade Freedom86.8

Investment Freedom80.0

Financial Freedom80.0

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Quick Facts
  • Population:
    • 36.7 million
  • GDP (PPP):
    • $1.8 trillion
    • 3.0% growth
    • 2.1% 5-year compound annual growth
    • $48,265 per capita
  • Unemployment:
    • 6.3%
  • Inflation (CPI):
    • 1.6%
  • FDI Inflow:
    • $24.2 billion

Canada’s economic freedom score is 77.7, making its economy the 8th freest in the 2019 Index. Its overall score has not changed, with increases in government integrity, labor freedom, and fiscal health countered by declines in judicial effectiveness, trade freedom, and government spending. Canada is ranked 1st among 32 countries in the Americas region, and its overall score is well above the regional and world averages.

The government is emphasizing trade diversification, export promotion, and support for small businesses and domestic industries affected by protectionism. It has also maintained an expansionary fiscal policy, and business investment has grown. Gradual monetary tightening by the central bank, however, has kept inflation contained. Canada’s economic competitiveness has been sustained by the solid institutional foundations of an open-market system and a high degree of regulatory efficiency. The independent judiciary provides strong protection of property rights and upholds the rule of law.

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Background

Canada is the world’s second-largest country by land area and has its 10th-largest economy. Prime Minister Justin Trudeau’s Liberal Party shifted Canadian politics to the left after ending the Conservative Party’s decade-long rule in 2015. Although the government prioritizes green policies, its support for the fossil fuel industry is crucial to the economy’s health. Canada closely resembles the U.S. in its market-oriented economic system, patterns of production, and high living standards. Leading sectors include automotive and other manufactures, forest products, minerals, and petroleum. About three-quarters of Canada’s exports go to the United States, so the successful 2018 renegotiation of the North American Free Trade Agreement (now called USMCA) was crucial.

Rule of LawView Methodology

Property Rights 87.0 Create a Graph using this measurement

Government Integrity 84.6 Create a Graph using this measurement

Judicial Effectiveness 69.4 Create a Graph using this measurement

Although 89 percent of Canada’s land area is owned by the state, the 11 percent that is privately owned is well protected. Protection of intellectual property rights meets world standards. Enforcement of contracts is very secure, and expropriation is highly unusual. The independent and transparent judiciary vigorously prosecutes corruption. Canada has a reputation for clean government, and the level of corruption is very low.

Government SizeView Methodology

The top federal personal income tax rate is 33 percent, and the top corporate tax rate is 15 percent. Other taxes include value-added and property taxes. The overall tax burden equals 31.7 percent of total domestic income. Over the past three years, government spending has amounted to 40.3 percent of the country’s output (GDP), and budget deficits have averaged 0.7 percent of GDP. Public debt is equivalent to 89.7 percent of GDP.

Regulatory EfficiencyView Methodology

The transparent regulatory framework facilitates commercial activity, allowing business formation and operation to be efficient and dynamic. Relatively flexible labor regulations enhance employment growth. The government has pledged to phase out extensive fossil fuel subsidies to meet G-20 environmental standards, but heavy state subsidies to airplane manufacturer Bombardier and other favored businesses continue.

Open MarketsView Methodology

The combined value of exports and imports is equal to 64.1 percent of GDP. The average applied tariff rate is 1.6 percent. As of June 30, 2018, according to the WTO, Canada had 435 nontariff measures in force. Foreign investment in some sectors, including aviation and telecommunications, is capped by the government. The banking sector remains sound. A wide range of nonbank financial companies operate in a prudent business environment.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Canada77.70.0
2United States76.81.1
3Chile75.40.2
4Saint Lucia68.71.1
5Jamaica 68.6-0.5
6Uruguay 68.6-0.6
7Peru67.8-0.9
8Colombia67.3-1.6
9Panama 67.20.2
10Saint Vincent and the Grenadines65.8-1.9
11Costa Rica 65.3-0.3
12Mexico64.7-0.1
13Barbados64.77.7
14Dominica63.6-0.9
15The Bahamas62.9-0.4
16Guatemala 62.6-0.8
17El Salvador 61.8-1.4
18Paraguay 61.8-0.3
19Dominican Republic61-0.6
20Honduras 60.2-0.4
21Nicaragua 57.7-1.2
22Trinidad and Tobago57-0.7
23Guyana56.8-1.9
24Belize55.4-1.7
25Haiti52.7-3.1
26Argentina52.2-0.1
27Brazil51.90.5
28Suriname48.10.0
29Ecuador46.9-1.6
30Bolivia42.3-1.8
31Cuba27.8-4.1
32Venezuela 25.90.7
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