By Steve Scherer and Fergal Smith
OTTAWA (Reuters) — Canadian Prime Minister Justin Trudeau has fueled economic growth and plugged gaps in the labor market by ramping up immigration, but now new arrivals are straining public services and contributing to an overheating economy, economists say.
Since taking power in 2015, Trudeau has brought in an estimated 2.5 million new permanent residents, driving the population above 40 million.
Canada's population grew at its fastest pace since 1957 last year, placing it among top 20 fastest growing countries in the world, Statistics Canada said, in part offsetting the effects of aging residents who are retiring and adding to healthcare costs.
In large part thanks to immigration, Canada has matched the United States with an average GDP growth of just over 2% over the past decade, well above the 1.4% G7 average, according to Marc Ercolao, an economist at TD Economics.
But problems caused by rapid immigration are beginning to show. First of all, the Bank of Canada struggled to pin down the impact of the newcomers as it tried to cool economic growth.
Bank of Canada Governor Tiff Macklem has said immigration adds to both supply and demand, but the overall effect has increased the need for higher interest rates. While immigrants helped ease a labor shortage, they added to consumer spending and housing demand.
«If you start an economy with excess demand (and) you add both demand and supply, you are still in excess demand,» he said about immigration earlier this month after hiking rates to a 22-year high of 5.0%.
The more concrete problems are the growing strains on transit, housing and healthcare, issues that have begun to dog the federal government as municipal and provincial leaders
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