Immigration Bolstered Canada’s Economy in 2023, But Policy Shift Raises Concerns for Future Growth
A reduction in immigration could hinder Canada’s economic momentum and exacerbate labor shortages, according to economists and business leaders, as the federal government scales back the number of new arrivals.
Experts credit immigration for helping Canada avoid a recession last year, but the recent decision to lower future admission targets has sparked warnings of economic challenges ahead.
Immigration Fueled Economic Growth in 2023
Statistics Canada reported that Canada’s population grew by 1.3 million in 2023, with 97.6% of that increase attributed to immigration. Economists say that the influx of people has been a key driver of GDP growth, helping to offset the economic headwinds from inflation and rising interest rates.
“If it was not for the population growth we had last year, Canada would have entered a recession by the end of 2023,” said Charles St-Arnaud, chief economist at Alberta Central. “Even though individuals are spending less due to economic pressures, the sheer increase in population kept the economy afloat.”
New Immigration Targets Reduced to Stabilize Housing and Services
In November 2023, the federal government announced a plan to admit 500,000 immigrants annually in 2025 and 2026. However, Immigration Minister Marc Miller announced on Thursday a significant reduction in those targets: 395,000 in 2025, 380,000 in 2026, and 365,000 in 2027.
The policy shift aims to ease pressure on Canada’s strained housing market and stabilize public services. “Population growth needs to be managed to avoid exacerbating housing shortages and service bottlenecks,” Miller said.
Economists Warn of GDP Decline and Labor Shortages
Economists caution that curbing immigration could negatively affect GDP growth. Rebekah Young, an economist at Scotiabank, warned that slower population growth, or even a decline, could shrink GDP by as much as 0.75%.
“Even a small contraction in GDP will be felt, particularly as businesses across sectors rely on workforce growth to maintain operations,” Young said.
Dan Kelly, president of the Canadian Federation of Independent Business (CFIB), echoed these concerns, emphasizing that immigration—both permanent and temporary—has been essential for keeping many industries afloat.
“Our members are struggling to fill vacancies, particularly for roles like night shifts at quick-service restaurants,” Kelly said. “Immigrants have been a lifeline for the Canadian economy, and scaling back these numbers will hurt.”
Kelly added that raising wages is not always feasible for businesses, especially in the food and retail sectors.
Businesses Fear Operational Challenges Amid New Immigration Limits
Business organizations, including the Canadian Chamber of Commerce, have expressed concerns over the economic impact of the new immigration plan. Diana Palmerin-Velasco, senior director for the Future of Work at the Chamber, stressed the importance of immigration to economic and workforce growth.
“Immigration is critical, particularly as we face an aging population, low fertility rates, and a wave of retirements,” Palmerin-Velasco said.
Shift in Policy Could Ease Public Sentiment on Immigration
While business leaders fear the reduction in immigration will hurt the economy, some experts believe the move could help ease negative public attitudes toward immigration.
Victoria Esses, director of the Network for Economic and Social Trends at Western University, explained that public anxieties about job competition and resource allocation tend to rise during economic slowdowns.
“A smaller influx of immigrants could reduce some of the negative perceptions we’re seeing right now,” Esses said, noting that economic uncertainty often fuels anti-immigration sentiment.
Balancing Growth and Public Resources
The federal government’s decision to lower immigration targets represents an attempt to balance economic growth with the housing crisis and strained public services. However, economists and business leaders caution that scaling back immigration may come at the cost of slower GDP growth and intensified labor shortages.
As Canada navigates these changes, policymakers will need to carefully manage the trade-offs between stabilizing the economy and addressing public concerns over immigration.
Source : Swifteradio.com
