Was This Really a Lost Decade for Canada? Sadly, Yes.
April 2025
A LACK OF CAPITAL INVESTMENT AND STAGNANT LABOR PRODUCTIVITY IMPACTS PERFORMANCE
Over the past decade, global economies have experienced uneven growth trajectories shaped by demographic shifts, technological change, and the lasting effects of the pandemic. While Canada has posted relatively strong aggregate GDP growth, its performance on a per capita and productivity basis has lagged significantly amongst G7 and OECD nations. This Digest compares Canada’s economic outcomes to those of other advanced economies, highlighting the underlying drivers of growth and offering insights into the country's long-term economic competitiveness and living standards.
Key Takeaways this Month:
Productivity Continues to be a Major Problem for Canada: While Canada appears to have experienced strong GDP growth over the last decade, this is largely driven by population increases rather than productivity gains, which in combination have resulted in the second worst performance in the OECD on a per capita basis.
Low Investment Impacting Canadian Growth: The level of investment in Canada, which has declined 18% since Q4 2014 (excluding government spend), is largely responsible for Canada’s stagnant productivity, which ranks in the bottom third amongst the OECD index constituents (3rd highest in 2014).
Growing Prosperity Gap Relative to the US: Canada’s GDP per capita continues to lag the US, and the gap (USD per capita) has more than doubled over last decade. The relative impact is more visible amongst the prairie provinces as investment levels have yet to recover since experiencing a sharp contraction following the oil price shocks of 2014-2016.
Real GDP Per Capita Growth vs. Aggregate Real GDP Growth (2014 – 2024)
Of the G7, Canada is second only to the US in aggregate GDP growth, however per capita economics trail amongst the OECD, with Canada ranking 37 of 38.
Different Metrics Tell a Vastly Different Story of Economic Growth: Canada's robust population growth has significantly influenced its aggregate GDP growth figures over the last decade (19%, second to only the US within the G7). However, per capita economic performance trails amongst the OECD, with Canada ranking 37 of 38. While population growth over the last several years is a key factor in driving overall GDP growth, this masks weaknesses in labor productivity which has persisted long before the post-pandemic population boom. Unsurprisingly, investment in Canada (also referred to as gross fixed capital formation), closely aligns with the per capita performance trends.
OECD Investment vs. Labor Productivity Indices (% Change) (2014-2024)
Investment levels in Canada have stagnated materially within the OECD peer group leading to weakening productivity trends.
Aggregate Real GDP Growth vs. Population Growth (2014-2024)
While population growth has been propelling overall GDP, the economic gains lag compared to other countries with similar population growth (except Luxembourg).
G7 Comparison: Real GDP per Capita Growth (2014 – 2024)
Canada’s real GDP per capita growth of 1.4% trails the G7 average of 8.6% over the last decade.
Canada Real per Capita Growth by GDP Components (2014 – 2024)
While Canadian consumption and government spending continue to grow, aggregate investment was down 18.4% from 2014.
What’s Driving Decade Long Underperformance?: At first glance, Canada’s Q4 2024 GDP report provided robust top line growth at 2.4% YoY. Real GDP per capita also increased by a modest 0.01% YoY breaking the negative growth trend over the past seven quarters. However, it is evident that Canada’s real per capita GDP still significantly trails G7 peers having only grown by 1.4% since Q4 2014 (compared to the G7 average of 8.6% in the same period). On a per capita basis, it appears that the level of investment in Canada, which has declined 18.4% in aggregate since 2014 (excluding government investment), is largely responsible for Canada’s stagnant productivity.
Five-Year Provincial Real per Capita Growth vs. Investment per Capita Growth (2018 – 2023)
Since 2018, the Prairies (AB, SK and MB) have seen an 11% decline in investment per capita alongside a 3% decrease in real GDP per capita.
Investment Drought In The Prairies: Since 2018, Alberta, Saskatchewan and Manitoba have faced an 11% decline in provincial investment per capita (40% since 2014) which is mirrored by a 3% decrease in real GDP per capita. BC is the only province to see material investment growth in the last five years, with provincial investment per capita having increased by 11% compared to a 3% increase in real GDP per capita.
Quarterly Government Debt-to-GDP
Canada continues to expand its government-debt-to-GDP (now standing at 96%, up from 91% in 2023) However, this metric remains on the lower end of our G7 peers.
Quarterly Non-Financial Corporate Debt Service Ratio*
Canadian corporations’ ability to service debt continues to decline and is nearly tied for the worst of the G7.
Quarterly Household Debt Service Ratio*
Canadian households have the lowest ability to service their debt obligations of the G7.
CANADA & U.S. GDP PER CAPITA COMPARISON - CHAINED 2017 DOLLARS (2013 - 2023)
2013-2023 Growth Rate – Local Currency
Growth in the information & energy sectors, and resilient consumer spending and investment were key drivers of economic growth in the US.
2013 GDP per Capita (US$000s)
2023 GDP per Capita (US$000s)
The Relative Prosperity of Canadians Decreased Over the Last 10 Years: The U.S. experienced GDP per capital growth of 19% between 2013 to 2023 relative to 6% for Canada (comparing growth in local currencies). On a provincial basis, weak economic growth in Alberta and Saskatchewan was largely due to lower levels of investment which fell off sharply after 2014 and have yet to return to levels seen prior to the oil price shocks of that year. Conversely, BC enjoyed robust consumer spending over the last 10 years and stable investment which contributed to its stand-out growth.
Sources: OECD, Worldbank, Statistics Canada, Bank for International Settlements, U.S. Bureau of Economic Analysis (BEA), U.S. Census Bureau, Diamond Willow Advisory.
