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Canada's New Immigration Restrictions To Change Forecasts

CANADA
  • Government plan to reduce non-permanent residents by 500K to 2M in 2026 is causing economists to revise forecasts.
  • Population +1.3M in 2023 or 3.2%, the fastest growth since 1957. Of that increase, 63% were non-permanent residents.
  • There has been divergence between aggregate and per capita data. GDP per capita fell for fifth time in six quarters in Q4 2023 vs +0.2% aggregate GDP. Employment rate posted 6th consecutive decrease in March despite employment being little changed.
  • Desjardins says immigration cut will be seen in lower shelter price inflation, but have little impact on mortgage interest costs that have boosted headline inflation.
  • BoC forecasts show growth on uneven path as a result of the policies. 2024 GDP forecast increased to 1.5% from 0.8% due to rapid immigration but 2025 revised down as restrictions take effect.
  • Inflation impact seen as mixed. BoC note from Dec found "initial rise in immigration that Canada has experienced is more likely inflationary in the near term."
  • Desjardins predicts decrease in NPRs will increase productivity, which fell 1.8% in 2023, but have negative impacts on GDP and government balances.
  • RBC expects labour participation to fall and shortages to intensify. Immigrants have higher participation rates and retirement ages compared to Canadian born workers.
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