Justin Trudeau diversified Canada’s economy like no one before

It seems like Canada has been in the news for all the wrong reasons lately. The Bank of Canada was blamed for tanking global bond markets earlier this month when it unexpectedly raised benchmark interest rates to the highest in 22 years. Then there’s the toxic, Martian-like haze from wildfires raging in British Columbia to Nova Scotia.

And yet, these events obscure a more relevant reality, which is that Canada is booming like it never has before. Unprecedented population growth, record-low unemployment, the most diversified economy in its 156-year history and a world-beating stock market since 2021 are contributing to what nine out of 10 economists say will be the best performer among the Group of Seven developed countries by 2025.

Prime Minister Justin Trudeau, who has been in his position since 2015, started the process of transforming the eighth-largest economy from hidebound finance and fossil fuels to technology and other 21st century industries. Unlike most of his G7 peers, Trudeau welcomed immigrants
after jump-starting his successful campaign for office with a hitherto taboo declaration that it was time during a period of exceptionally low interest rates to boost public spending and invest in greater diversity even if that meant tolerating budget deficits. His open-door policy enabled Canada for the first time to expand by more than 1 million people, or 2.7 percent in 2022, the fastest growth among industrialized economies and a rate comparable to many African nations (international migration accounted for 95.9 percent), according to Statistics Canada.

To be sure, the housing market remains unaffordable for too many Canadians, partly as a result of the surge in immigration. Inflation, meanwhile, shows no signs of decelerating to its pre-pandemic pace which means perpetual credit tightening by the Bank of Canada may hasten a recession.

Despite such forebodings, Trudeau's policies are proving so successful that a national poll earlier this year found that 52percent of respondents said the prime minister's plan to increase the number of new permanent residents each year will benefit the economy (38percent said the increase will be a detriment). Sure enough, the gap between people with jobs and those without has never been wider with a record 20.1 million employed in April, overwhelming the all-time-low unemployment rate of 5percent, according to data compiled by Bloomberg. The 3.9 percentage-point decline in the jobless rate since the end of 2020 is the biggest improvement after the Covid-19 pandemic among the 10 largest economies (the US was No. 2 with a 3.3 percentage-point decrease).

Canada's fullest employment is reflected in the more balanced economy Trudeau promised when he entered 24 Sussex Drive in Ottawa. Financial companies, the biggest industry by market value in the S&P/Toronto Stock Exchange Composite Index, shrank to 27.8percent from 33.5percent, energy fell to 15.7percent from 17.7percent while technology almost doubled to 10.2percent from 5.4percent. Materials and industrials rose to 12.3percent and 11.8percent from 9.4percent and 7.6percent. Corporate Canada, which exported a record $624 billion in 2022's third quarter, has never been so diversified, according to data compiled by Bloomberg.

Canada already is the fastest-growing economy after the US in the G7 this year and will probably repeat that performance in 2024, according to economist forecasts compiled by Bloomberg. It will be No. 1 in 2025 with gross domestic product expanding 2.3percent. Technology is driving much of the growth. Shopify Inc., the Ottawa-based commerce platform provider, is the country's third most valuable company and the No. 5 application software company in the world after more than doubling in value from its 2015 initial public offering. None of Shopify's peers will come close to matching its 22percent sales growth this year, according to analyst estimates compiled by Bloomberg.

Nuvei Corp, the Montreal-based payment processing company that went public in 2020 and receives 60percent of its revenue from outside North America, will appreciate 90percent over the next 12 months on sales growth of 47percent, according to analyst estimates compiled by Bloomberg. Bombardier Inc., the Montreal-based manufacturer of private jets, appreciated 171percent during the past 12 months after reporting eight consecutive quarters of positive earnings surprises -- a net-income superlative unmatched by any of Bombardier's global peers.

That's a far cry from Canada during the first six years of the new century when Canadian shares showed greater price fluctuations and a total return (income plus appreciation) that was 64 percent less than the Bloomberg World Large & Mid Cap Index. Not only are Canadian shares less volatile than they've ever been, they're beating the benchmark by 13 percentage points, according to data compiled by Bloomberg.

Unlike any of his peers in the developed world, Trudeau managed to show 40 million fellow citizens the benefits of immigration, evidenced by the economy's performance, which is another way of saying investing in Canada turned out to be the best bet yet.

Matthew A. Winkler Matthew Winkler, Editor-in-Chief Emeritus of Bloomberg News, writes about markets. Views are personal and do not represent the stand of this publication.

Credit: Bloomberg