In recent times, Canada has witnessed substantial population growth, predominantly fueled by foreign workers and international students. This demographic shift has been critical in the country’s economic landscape. However, recent discussions by the federal government about potentially curtailing the influx of non-permanent residents (NPR) could have significant implications. A new report from Desjardins warns that such a move might exacerbate the expected recession in 2024.
Balancing Growth and Economic Stability
The report, authored by Desjardins’ senior director of Canadian economics, Randall Bartlett, highlights a natural decline in NPRs as the economy decelerates. Bartlett’s analysis projects a dip in real GDP growth to just 0.1 percent in 2024, a considerable drop from the 1.1 percent growth of the previous year.
However, he cautions against aggressive policy measures to reduce NPR admissions to zero. According to the report, such policies could lead to Canada’s real GDP contraction by 0.7 percent in 2024. More importantly, it could dampen the recovery process post-recession, resulting in a lower potential GDP.
In the backdrop of this, Canada’s population has surged to 40.5 million as of last fall, placing it among the world’s most rapidly growing nations. A significant contributor to this growth has been the increase in temporary residents. Statistics Canada reported a record high in NPR growth, with over 2.5 million in Canada as of October 2023, up from 1.7 million the previous year.
The Immigration Conundrum: Economic Growth vs. Strain on Resources
Bartlett’s report suggests that doubling NPR admissions could bolster the economy by one percent this year, with the potential for more robust growth in the following years. Nevertheless, he also warns of the risks associated with sustained high NPR admissions, such as exacerbating housing affordability issues and fuelling inflation. These factors could compel the Bank of Canada to maintain elevated interest rates for an extended period.
Acknowledging these challenges, the federal government has hinted at possible reductions in temporary resident admissions. Immigration Minister Marc Miller intends to better align Canada’s immigration system with its labor market needs. Recently, Miller announced an increase in the cost-of-living financial requirement for international students and hinted at a potential cap on international student visas to regulate the quality of education and student support by designated learning institutions.
As Canada approaches September 2024, the balance between fostering economic growth and managing the strains of a growing population becomes increasingly delicate. Policymakers are tasked with navigating these complexities to ensure economic stability and sustainable development in the face of global economic uncertainties.
