Skip to main content

Canada needs a 'shot in the arm' if it is to catch up to other economies, such as Australia and South Korea, which are actively improving the reach and speed of the Internet, says a new study by Boston Consulting Group.Ryan Remiorz/The Canadian Press

Canadian businesses and governments are lagging several western nations in the "Internet economy" and are being warned that they risk falling even further behind unless they take immediate and more aggressive action.

The Internet contributed $49-billion to Canada's gross domestic product last year, representing 3 per cent of the country's economy, a report to be released Monday by the Boston Consulting Group estimates. It is projected to hit $76-billion by 2016, or 3.6 per cent of GDP.

Tracking the value of the Internet is tricky business. This study measures the Internet economy by adding online consumption, investment, government spending and net exports of all Internet-related goods and services. By current measures, if the Internet were a sector in Canada, it would be larger than agriculture, utilities or hospitality.

That may sound sizable, but it lags other countries. Canada's projected Internet economy growth rate of 7.4 per cent trails other developed nations in the G20 which are growing at an average of 8.1 per cent through 2016.

"Our data point to the fact that, across every sector, we could and should be doing more," said Tawfik Hammoud, partner and managing director in BCG's Toronto office.

While economic growth in most advanced nations is expected to be slow for years to come, the Internet economy represents is a bright spot that should be tapped. The Internet economy "offers one of the world's few unfettered growth stories," said Paul Zwillenberg, a BCG partner and co-author of the report. "Policy makers often cite GDP growth rates of around 10 per cent per year in the developing markets, but they look past similar rates close to home."

Across the G20, the value of the Internet economy will almost double to $4.2-trillion (U.S.) in the next four years, or 5.3 per cent of GDP, from $2.3-trillion or 4.1 per cent last year.

Canada now ranks in ninth place of G20 nations in terms of Internet contribution to GDP. By 2016, it is expected to slide to 12th place, overtaken by Mexico and Saudi Arabia.

Canada needs a "shot in the arm" if it is to catch up to other economies, such as Australia and South Korea, which are actively improving the reach and speed of the Internet.

"It will take a ramping up of efforts" on the part of both governments and businesses, particularly small and medium-sized firms, Mr. Hammoud said. Otherwise, "Canada runs the risk of falling further behind."

The study, commissioned by Google, is the latest in a series of BCG reports on the rise of the Internet and is the first to place a value on Canada's Internet economy.

Follow related authors and topics

Authors and topics you follow will be added to your personal news feed in Following.

Interact with The Globe