The National Bank of Canada has raised an alarm regarding the country's economy, describing it as having shrunk to a level that is "unprecedented outside a recession." This economic downturn is attributed, in part, to a substantial increase in population resulting from immigration, which has consequently led to a decline in the growth of Gross Domestic Product (GDP) per capita.

Signs of Economic Slowdown

Recent reports from the company have indicated that signs of an economic slowdown are becoming increasingly evident. Notably, the third-quarter GDP data has fallen below economists' consensus expectations, showing an apparent contraction. A significant factor contributing to this contraction has been a decrease in private domestic demand. Furthermore, consumption has stagnated for the second consecutive quarter, a considerable setback given the current demographic landscape characterised by record population growth.

Specifically, in the third quarter, the GDP per person in Canada experienced a 4.4 per cent annual decline. It has raised concerns among Canadian business owners, primarily about domestic demand.

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Immigration and Economic Slowdown

Additionally, the report underscores that Canada's GDP has experienced a continuous decline over the past five years. Economist Mikel Skuterud from the University of Waterloo has attributed this phenomenon, in part, to the population boom in Canada. He stated, "I think you'd be hard-pressed to find any economist in Canada that doesn't believe that the exceptionally high population growth rates we're experiencing now have contributed to that decline in GDP per capita that we're seeing."

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However, Skuterud also points out that immigration is not the sole factor responsible for the slowdown in GDP per capita. He highlights the simultaneous increase in the inflation rate, which stands at 3.1 per cent, leading to a six per cent annual rise in the cost of shelter.

Furthermore, the report reveals that the surge in population is causing increased unemployment. More jobs are needed for the influx of people into the country, resulting in an unemployment rate of 5.9 per cent in November, marking an increase of eight-tenths of a percentage point in just seven months.

Future Immigration Plans

In 2023, Canadian authorities registered 526,000 new permanent residents and newcomers, with the total population reaching 38 million.

Canadian authorities have unveiled plans to welcome nearly 1.5 million new immigrants between 2024 and 2026, representing a significant increase from previous years. However, internal documents obtained by the Canadian Press have revealed that federal public servants warned the government about the potential impact of such substantial increases in immigration on housing affordability and services two years ago. These concerns highlight the complexities and challenges of managing population growth and its effect on the Canadian economy.