Canada’s Financial Strain: Limiting the influx of temporary workers and international students to Canada could worsen an impending recession and hinder the subsequent economic recovery.
With a record-breaking population growth rate of 3.2%, Canada faces challenges such as increased housing costs and a strained labour market, prompting Prime Minister Justin Trudeau to consider policy adjustments.
While an outright ban on non-permanent residents is not on the table, there is a recognition of the need for policy adjustments to manage the significant expansion in temporary residents.
Canada’s Financial Strain Viral
Randall Bartlett, senior director of Canadian economics, explored the potential consequences of immigration changes. If the flow of temporary residents were abruptly halted, the real GDP would fall significantly below current projections, potentially doubling the length of the anticipated recession in the first half of 2024.
In the 12 months leading up to October, Canada welcomed 454K new permanent residents and a record 804K non-permanent residents. While temporary admissions are expected to slow naturally with economic changes, government policy adjustments could expedite this decline.
However, this could also contribute to heightened inflation, complicating the central bank’s responsibilities and potentially keeping interest rates elevated for an extended period. Conversely, halting the arrival of temporary residents could help contain inflation.
The delicate balance between managing immigration and sustaining economic stability in Canada is crucial, with policy decisions holding the potential to significantly impact economic forecasts, inflation rates, and the overall trajectory of the country’s recovery.