desjardins securities inc.Restricting the number of temporary workers and international students entering Canada will exacerbate the recession and weaken the subsequent recovery, he said.
The record number of new immigrants has pushed Canada's population growth rate to 32%, making it one of the fastest-growing countries in the world. The population boom has boosted the labor market, but it has also pushed up housing costs, sparking a backlash in the quintessential immigrant-friendly country.
Prime Minister Justin Trudeau acknowledged the need to adjust policies in response to the "massive expansion" of temporary residents.
Randall Bartlett, senior director of Canadian economics at Desjardins, examines the impact of immigration changes.
If the influx of temporary residents gradually stops, real GDP will be significantly lower than it is now**, so the recession will double in the first half of 2024, he wrote in a report released on Wednesday.
"Policymakers need to be cautious and try to balance the economic negative impact of an excessively rapid decline in new arrivals," Bartlett said. But this is not an easy balance to achieve, as a consistently high level of non-permanent resident arrivals could put further pressure on provincial finances and housing affordability.
In the 12 months to Oct. 1, Canada admitted 454,590 new permanent residents while bringing in a record 804,690 non-permanent residents. Bartlett said the number of temporary residents should naturally slow as the economy develops, but policy changes could cause the number of temporary residents to fall faster.
Desjardins' hypothesis is that the number of non-permanent residents in 2024 would be about half of last year's, then halved again in 2025, and then bottomed out in 2026 and started to rise again.
Based on these estimates, Desjardins expects real GDP to grow by just 01%, with an average annual growth rate of about 195%。
But Bartlett noted that if Canada closes its doors to temporary residents, real GDP will fall by 07% and an average annual growth rate of 178%。
On the other hand, if Canada doubles the rate of entry for non-permanent residents, the country's economic recovery will be milder than expected and it is possible to avoid a recession altogether. Bartlett said real GDP will grow by 1% in 2024 and will average 21%。
Officially, the Bank of Canada will not see a recession, but Governor Tiff Macklem said in an interview that "things won't be good" in the first half of 2024.
Bartlett said that increasing the entry of temporary residents could also lead to higher inflation, complicating the work of the central bank and possibly keeping interest rates higher for longer. On the contrary, preventing these people from entering the country will further curb inflation.