2018 Index of Economic Freedom

Canada

overall score77.7
world rank9
Rule of Law

Property Rights87.5

Government Integrity78.3

Judicial Effectiveness77.1

Government Size

Government Spending52.3

Tax Burden76.7

Fiscal Health81.2

Regulatory Efficiency

Business Freedom81.8

Labor Freedom71.3

Monetary Freedom77.5

Open Markets

Trade Freedom88.1

Investment Freedom80.0

Financial Freedom80.0

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Quick Facts
  • Population:
    • 36.2 million
  • GDP (PPP):
    • $1.7 trillion
    • 1.2% growth
    • 1.8% 5-year compound annual growth
    • $46,437 per capita
  • Unemployment:
    • 7.1%
  • Inflation (CPI):
    • 1.4%
  • FDI Inflow:
    • $33.7 billion
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Canada’s economic freedom score is 77.7, making its economy the 9th freest in the 2018 Index. Its overall score has decreased by 0.8 point, with declines in judicial effectiveness, government integrity, and labor freedom outweighing a small improvement in fiscal health. Canada is ranked 1st among 32 countries in the Americas region, and its overall score is well above the regional and world averages.

Canada’s economic competitiveness has been sustained by strong rule of law and the solid institutional foundations of an open-market system. The government is pushing ahead with massive infrastructure spending, including through a proposed infrastructure bank, and accelerated growth rates are enhancing government revenue. Top tax rates have gone up nationally and in some provinces, but the government has been forced to scale back small-business tax reform in the face of strong opposition. The renegotiation of NAFTA demanded by the United States has created considerable economic uncertainty.

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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 has shifted Canadian politics to the left since ending the decade-long rule of Conservatives and winning a parliamentary majority in 2015. Although the government prioritizes green environmental 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 manufactured goods, forest products, minerals, and petroleum. Economic growth has recovered after slowing briefly in 2016. About three-quarters of Canada’s exports go to the United States.

Rule of LawView Methodology

Property Rights 87.5 Create a Graph using this measurement

Government Integrity 78.3 Create a Graph using this measurement

Judicial Effectiveness 77.1 Create a Graph using this measurement

Foreign investors have full and fair access to Canada’s legal system, and rights to private property are limited only by the government’s rights to establish monopolies and expropriate for public purposes. Protection of intellectual property rights meets world standards. Enforcement of contracts is very secure. The independent and transparent judicial system’s record is impeccable. Corruption cases are prosecuted vigorously.

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 31.9 percent of total domestic income. Over the past three years, government spending has amounted to 39.9 percent of total output (GDP), and budget deficits have averaged 1.0 percent of GDP. Public debt is equivalent to 92.3 percent of GDP.

Regulatory EfficiencyView Methodology

The transparent regulatory framework facilitates dynamic and robust business formation and operation. Relatively flexible labor regulations enhance employment growth. A large majority of the labor force is employed in the services sector. Under the Liberals, the federal government has provided billions in subsidies to energy producers. Ontario’s provincial government has imposed some rent controls.

Open MarketsView Methodology

Trade is significant for Canada’s economy; the combined value of exports and imports equals 64 percent of GDP. The average applied tariff rate is 1.0 percent. Nontariff barriers impede some trade. In general, government policies do not significantly interfere with foreign investment. The financial sector provides a full range of competitive services. The six main banks remain dominant, but it is now easier for foreign banks to enter the market.

Country's Score Over Time

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Regional Ranking

rank country overall change
1Canada77.7-0.8
2United States75.70.6
3Chile75.2-1.3
4Uruguay 69.2-0.5
5Jamaica 69.1-0.4
6Colombia68.9-0.8
7Peru68.7-0.2
8Saint Vincent and the Grenadines67.72.5
9Saint Lucia67.62.6
10Panama 670.7
11Costa Rica 65.60.6
12Mexico64.81.2
13Dominica64.50.8
14Guatemala 63.40.4
15The Bahamas63.32.2
16El Salvador 63.2-0.9
17Paraguay 62.1-0.3
18Dominican Republic61.6-1.3
19Honduras 60.61.8
20Nicaragua 58.9-0.3
21Guyana58.70.2
22Trinidad and Tobago57.7-3.5
23Belize57.1-1.5
24Barbados572.5
25Haiti55.86.2
26Argentina52.31.9
27Brazil51.4-1.5
28Ecuador48.5-0.8
29Suriname48.10.1
30Bolivia44.1-3.6
31Cuba31.9-2.0
32Venezuela 25.2-1.8
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