Economic freedom in Canada is on the decline: Fraser Institute

Canada’s standing in global economic freedom rankings has slipped again, even as new data shows the economy may be stabilizing after months of contraction.

The Fraser Institute’s Economic Freedom of the World report, released September 25, ranks Canada 11th worldwide based on data from 2023 — down from 8th in last year’s report. The index measures openness to trade, tax and regulatory burdens, government spending and property rights protections. Researchers say Canada’s decline reflects rising government size and increased taxation since the pandemic.

“The index published in Economic Freedom of the World 2025 measures the degree to which people in 165 jurisdictions around the globe are allowed to make their own economic choices,” according to the Fraser Institute’s website.

“Canadians should understand that when people are more economically free, they enjoy higher standards of living,” Matthew Mitchell, senior fellow at the Fraser Institute, said in a statement.

Increased taxation driving Canada’s decline in economic freedom

A major driver of Canada’s slide is its poor showing on government size.

The Fraser Institute also ranks worldwide governments based on size, “where higher rankings indicate lower taxation and less government spending.” In 2014, Canada placed 71st globally on the measure of government size.

However, that ranking deteriorated sharply during the pandemic, when public spending surged — the nation now sits at 102nd. Fraser Institute analysts argue that high levels of government intervention erode the competitiveness of Canadian businesses and households compared to international peers.

Globally, overall economic freedom rankings saw Hong Kong maintain the top spot despite a declining score, while the U.S. ranked fifth and the U.K. 13th. Among G7 peers, Canada now sits behind both the U.S. and Germany.

Sponsored

Smart investing starts here

Build your own investment portfolio with CIBC Investor’s Edge online and mobile trading platform. Enjoy low commissions on trades and special pricing for active traders, students and young investors.

Get started today

Potential GDP rebound complicates the picture

The report’s release coincides with tentative signs of Canada’s economic resilience, however.

After three months of decline, Statistics Canada reported July GDP rose by 0.2%, driven by mining, manufacturing and utilities. If August holds steady, the third quarter could post a modest 0.7% annualized gain, according to analysts, which could be enough to keep Canada safe from a recession this year.

While the Fraser Institute points to rising taxes and regulation as long-term drags, a short-term GDP recovery suggests other economic forces may be providing a cushion. Still, analysts warn the recovery is uneven: growth was concentrated in goods-producing industries, while services expanded only modestly.

Canada’s economic outlook

Nevertheless, the Fraser Institute stresses that declining economic freedom carries real-world consequences. Its analysis links higher economic freedom to higher GDP per capita, lower poverty rates and longer life expectancy.

In 2023, countries in the top quartile of economic freedom recorded per-person GDP of US$66,434 (CDN$92,500), compared with just US$10,751 in the lowest quartile.

“Where people are free to pursue their own opportunities and make their own choices, they lead more prosperous, happier and healthier lives,” Mitchell said.

For Canadians, the concern is just how current fiscal and regulatory choices, not to mention any potential trade deals, will weigh on future prosperity, even as short-term economic signals show signs of hope.