AI Overview
Canada experienced a recession as a result of the 2008 financial crisis, although the impact was generally less severe than in other G7 nations. The Canadian economy saw a decline in real GDP, primarily due to a sharp drop in exports and a resulting decrease in business investment. The Bank of Canada responded by lowering interest rates and implementing other measures to support the economy.
Here's a more detailed look:
- Recession Impact:
Canada's GDP fell by 3.3% between the third quarter of 2008 and the second quarter of 2009, compared to a 3.8% decline in the United States and larger declines in Europe and Japan.
- Export Losses:
Export earnings declined by 22% in 2009, with the most significant drop occurring between the fourth quarter of 2008 and the first two quarters of 2009.
- Business Investment Decline:
Business investment fell by a record 14% in 2009, particularly in mining and manufacturing, which heavily rely on exports.
- Corporate Profit Losses:
Corporate profits plummeted by 33% in 2009 due to the drop in exports.
- Household Wealth Impact:
While household wealth increased significantly before 2008, the slumps in stock markets and house prices in the second half of the year resulted in a 7.3% reduction in household net worth, according to Statistics Canada.
- Bank of Canada Response:
The Bank of Canada responded to the crisis by lowering the target interest rate rapidly and implementing other measures to support the economy, notes the Bank of Canada.
- Government Response:
The Canadian government implemented an Economic Action Plan to provide financial support and stimulate the economy, including infrastructure projects.