RBC chief economist Frances Donald says slower growth the 'new normal' over next few years

financialpost.com:

The Bank of Canada all but declared victory over inflation in 2024 and started cutting interest rates, which gave some people relief, but Royal Bank of Canada’s (RBC) chief economist Frances Donald says some prices are still 20 per cent higher than they were before the pandemic, and that’s something Canadians will be dealing with in 2025.

High prices, she said, are going to be one of the major economic themes in 2025, along with the pressure that Donald Trump’s election in the United States will put on Canada.

Below, Donald gives her outlook for the year, including whether Canada is entering a recession, the threat of 25 per cent tariffs and how the Canadian dollar will hold up with all the headwinds the country is facing.

FP:

FD: We should accept slower economic growth as somewhat of the new normal for the next few years. We tend to think about growth as coming from two big-picture places. The first is, how many people do you have working in your economy? That’s your labour force participation rate. And the second is productivity. Canada actually has really terrible productivity growth, it’s actually been negative; and in the next three years, Canada has changed its immigration policy to such a significant extent that we’re actually going to see population declines for the next few years. That means this economy is not going to grow very quickly.

The silver lining is that in the past several years, the economy as a whole might have been growing, but every Canadian’s share of that economy, or GDP per capita, has actually been shrinking. What we might see in the next few years is the reverse of that, which is that the total economic growth might seem like it’s stuck in neutral, but as the population declines, each