REFERENCE CODE: ML00002-006 PUBLICATION DATE: Aug 2012 WWW.MARKETLINEINFO.COM © MARKETLINE. THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED
Country Analysis Report: Canada, In-depth PESTLE Insights ML00002-006 © MARKETLINE THIS PROFILE IS A LICENSED PRODUCT AND IS NOT TO BE PHOTOCOPIED
This profile analyzes the political, economic, social, technological, legal, and environmental (PESTLE) structure in Canada. Each of the PESTLE factors is explored on four parameters: current strengths, current challenges, future prospects, and future risks.
Canada has a strong democratic setup, but continuing student protests remain a challenge
In Canada, democratic principles are predominant, and all governments, whether coalition, Conservative, or Liberal, have always followed stable democratic policies. The country has also proactively taken up free trade negotiations with many countries in the Americas, Europe, and elsewhere with the aim of growing its economy. Additionally, the country is pursuing many agreements that will enable bilateral and regional free trade, avoid double taxation, protect foreign investment, strengthen financial and banking institutions, and assist development. However, Quebec has been witnessing protests by students since February 2012. Jean Charest, Quebec’s prime minister, announced in February 2012 that tuition fees in universities would be increased by C$1,625 ($1,595) during the next five years. This translates to an increase of 60%. In May 2012, the governments of the province and the city passed laws to crack down on protests. Classes have been suspended until August 2012 and student groups that transgress are to be fined up to C$125,000 ($122,703). Furthermore, laws bar students from wearing masks, forbid protests within 50 meters of universities, and compel organizers of demonstrations involving more than 50 people to give a schedule to police eight hours in advance. Officials were given the authority to reject routes on the grounds of personal safety. This has enraged students, who have in turn widened the agenda of their agitation, suggesting that future protests will not just be against the hike in tuition fees but also against curbs on civil liberties. The government has to take steps to resolve the issue. The Canadian economy is expected to show good growth in the medium term, but high household debt is a risk
Under the next phase of its economic action plan, the Canadian government intends to aid economic growth and job creation through a low tax scheme and investments in innovation, education, and training. The country is also trying to forge closer economic ties with other countries and is undertaking free trade agreement (FTA) negotiations with several nations. These factors are expected to enable greater economic growth. The Canadian economy grew by 3.2% in 2010 and 2.4% in 2011. According to MarketLine forecasts, Canada is expected to record an average growth rate of 2.3% during 2012–17. This is a healthy rate of growth considering the weakness in the US and eurozone economies. However, Canada experienced an increase in household prices even after the 2008 financial crisis, unlike the US, where housing prices collapsed. The level of investment in households has continued to increase and reach close to the pre-crisis peak, but the level of indebtedness is quite high in historical terms. Households spend more than 40% of their income on interest payments, which is above the 2000–10 average. Therefore, if house prices come down, households will suffer as in the US. US households have still not recovered after the financial crisis, as the market values of their households are well below the mortgages. The risk for the Canadian economy is that borrowing by households has increased at a faster rate than the increase in disposable incomes. This...