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Canada is no Portugal

Quick quiz: name the country who this week had its government brought down, and is facing an election, partly because the opposition did not approve of the recent budget?

Okay, there are two correct answers: Canada and Portugal. Actually as I write this the Canadian government hasn’t actually been brought down yet, but we all know where things are going.

Here’s my point though: despite some news stories linking the two, Canada and Portugal have very little in common aside from the usual political bickering. In fact, Canada has very little in common with most of the developed world, in the sense that it is doing so much better in terms of economics.

Let’s run through some statistics:

  • It’s true that Canada is running a deficit at the moment, as it has for the past few years (basically since the global economic crisis hit). The plan is to balance the books by 2015/16, and there is a good possibility it will happen before that. Portugal, on the other hand, has not run a budget surplus in thirty years and even if they said they were headed for one, their credibility would likely be insufficient to convince anyone in the markets that they were close to it;
  • Canada has a pretty impressive record on debt reduction: the Canadian debt to GDP ratio is now around 34 percent, basically the lowest in the G7. In Portugal, however, the debt to GDP ratio is 88 percent, and although it is supposed to start falling by 2013, there are lot of things that will have to go right for that to happen
  • In terms of economics, Canada is the star of the industrialized world. Economic growth was the fastest amongst the G7 last year, and the unemployment rate is 7.8 percent as of February. Portugal, however, is firmly in recession and has an unemployment rate of 11 percent.
  • Finally there is our bond rating: Canada is rating AAA by Standard and Poor’s, the highest possible. This week Portugal saw its rating lowered by two ratings agencies, including S & P which took it down two levels to BBB (still above junk level, but getting closer).

None of this is to pick on Portugal, or to suggest that there are not a lot of places that Canada could improve. And we should remember that Canada has had some less than stellar years too, when it was less than the economic rock star of the industrialized world.

Still, it doesn’t hurt to remind ourselves sometimes that a lot of things are actually going right, in an economic sense, close to home.

Yes, Canada does have some similarities with this week’s economic poster- child for a weak economy, but luckily for us they are political, not economic, in nature. 

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