Deputy governor Sylvain Leduc gave his vie on the country’s productivity
Whilst the Canadian economy is expected to go downhill in the next few quarters, the Bank of Canada believes that the slump will be just temporary.
Deputy governor Sylvain Leduc said the central bank is expecting more businesses to enter the Canadian market, with fewer firms tapping out over the coming quarters.
"It is also encouraging to note that the most recent data show that the rate of entry for new firms appears to have stabilized over the past few quarters," Leduc said in a speech, as quoted by Reuters.
He stated that the contributions from these nascent firms in boosting the productive capacity could spur an efficient cycle of growth in the economy.
Leduc explained that when the economy performs at a level higher than its potential output, inflation tends to accelerate. The opposite happens when the economy operates under its probable yield. Therefore, he said, an increase in productive capacity would allow the economy to accelerate faster without creating inflationary measures.
One way of increasing productivity is by reducing the barriers businesses have to face. Leduc noted that whilst Canada is recognised by the World Bank as one of the easiest countries to set up a business, there are still factors that limit firms to achieve their full potential.
He observed that the share of gazelles – those budding firms that grow quickly – in the Canadian economy has been shrinking since 1997. These gazelles are subject to these barriers that further dilutes their contribution to the economy.
“That said, significant challenges remain, as our productivity is still well below that observed south of the border. Productivity growth could certainly be increased by reducing the barriers that future ‘gazelles’ may face, which would further stimulate the Canadian economy,” he said.
A separate report from Financial Post quoted Leduc as saying that the recent free trade with Europe and the latest deal to alleviate limits to inter-provincial trade are some of the more encouraging ways to help these gazelles grow.
“These young, transformative companies that are growing at dizzying speeds have a good chance of developing new technologies that increase productivity,” he said.
For more of Wealth Professional's latest industry news, click here.
Related stories:
How will clients be impacted by another interest rate hike?
Why providing strong investment returns is no longer enough
Deputy governor Sylvain Leduc said the central bank is expecting more businesses to enter the Canadian market, with fewer firms tapping out over the coming quarters.
"It is also encouraging to note that the most recent data show that the rate of entry for new firms appears to have stabilized over the past few quarters," Leduc said in a speech, as quoted by Reuters.
He stated that the contributions from these nascent firms in boosting the productive capacity could spur an efficient cycle of growth in the economy.
Leduc explained that when the economy performs at a level higher than its potential output, inflation tends to accelerate. The opposite happens when the economy operates under its probable yield. Therefore, he said, an increase in productive capacity would allow the economy to accelerate faster without creating inflationary measures.
One way of increasing productivity is by reducing the barriers businesses have to face. Leduc noted that whilst Canada is recognised by the World Bank as one of the easiest countries to set up a business, there are still factors that limit firms to achieve their full potential.
He observed that the share of gazelles – those budding firms that grow quickly – in the Canadian economy has been shrinking since 1997. These gazelles are subject to these barriers that further dilutes their contribution to the economy.
“That said, significant challenges remain, as our productivity is still well below that observed south of the border. Productivity growth could certainly be increased by reducing the barriers that future ‘gazelles’ may face, which would further stimulate the Canadian economy,” he said.
A separate report from Financial Post quoted Leduc as saying that the recent free trade with Europe and the latest deal to alleviate limits to inter-provincial trade are some of the more encouraging ways to help these gazelles grow.
“These young, transformative companies that are growing at dizzying speeds have a good chance of developing new technologies that increase productivity,” he said.
For more of Wealth Professional's latest industry news, click here.
Related stories:
How will clients be impacted by another interest rate hike?
Why providing strong investment returns is no longer enough
