Posthaste: Canada's immigration clampdown could have more consequences than we thought
The Federal government’s move to rein in the entry of temporary residents to Canada could have more of an impact than we thought.
Ottawa wants to reduce the number of non-permanent residents to 5 per cent of the total population over the next three years.
Immigration has fuelled explosive population growth in Canada since the pandemic, raising concerns about whether the infrastructure, particularly housing, could handle it.
However, there’s also a negative flip-side to slowing the numbers.
If Ottawa is successful, it will have an impact not only on economic growth, but also on the country’s deficit and debt, says Randall Bartlett, senior director of Canadian economics at Fédération des caisses Desjardins du Québec.
The plan to limit non-permanent residents will slow growth in the working-age population, which in turn will slow growth in real gross domestic product.
“A slower pace of real GDP growth and inflation means that growth in nominal GDP — the broadest measure of the tax base — will be lower as well,” said Bartlett.
Yet the Federal Budget 2024 assumes high population growth in the next few years and doesn’t explicitly incorporate the planned reduction in non-permanent residents, suggesting risks to its real GDP forecast, he said.
Fewer non-permanent residents means lower revenues which could lead to larger deficits and higher debt.
“Indeed, the federal debt-to-GDP ratio could end the next five years at a higher level than in Budget 2024’s downside scenario,” said the economist.
When Desjardins applies the lower population growth forecast recently provided by Statistics Canada, the deficit swells nearly $8 billion a year higher than the Budget’s baseline.
“Of course, offsetting savings could be found by reducing
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