Challenges of Canadian Economy and Government Policies

ECONOMICS ASSIGNMENT

Contents
Canadian economy.....................................................................................................................3
Reference....................................................................................................................................6

Challenges of Canadian economy and government policies
The Canadian economy is facing a lot of problem at the moment. At one hand the budget
deficit is increasing exponentially and on the other hand, the manufacturing output is getting
affected due to the protectionism of the USA in terms of trade. However, one of the biggest
problems which are being faced by the economy of Canada is the incensing budget deficit of
the economy (Barry, 2017). The government spending component of the economy is too high
that it surpasses the tax revenue and the overall resources of the economy. One of the main
reasons for the poor government revenue is the tax collection mechanism which has been
criticised on many grounds.
The increasing budget deficit is a great problem for the economy as it is increasing the
external debt of the economy as well. External debt is a way to fund the national budget.
(Bayne, 2017) stated that this problem is important as the external debt and its amount
depends on the exchange rate of the country. That means if in the case in the future, the value
of the Canadian currency reduces it will increase the overall debt payments of the economy.
The main sources of the problem are the excessive spending of the government on service
provision which has increased a lot over the time.
Currently, in my opinion, the economy is getting worse due to the simultaneous events that
are happening around it. First, the, increasing budget deficit and the second is the worsening
trade relationship with the USA. The USA has been a prime trade partner for Canada for a
long period of time. Most of the manufactured raw material of Canada used to be exported to
the economy of the USA. Overall, the GDP of the economy is also decreasing since the last
year. Therefore, it can be said that the economy is going through a recession. However,
(Eagles & Nanos, 2017) stated that the recession that the economy of Canada is going
through is temporary in nature and can be avoided with correct policies and time. Despite
these problems, it is important to recognise the positive achievements of the government as
well. The government has improved the provision and services for the citizen of the country
(Gilpin, 2018). The health care support being provided by the government of Canada is the
best in the world. Apart from that the government has also spent in the education sector as
well thereby helping the cost of education lesser compared to the figures of 5 years ago.
Like all the other governments of the world, Canadian government has managed the economy
in the times of recession. It has undertaken suitable policies to stabilise the economy in times