The Federal government of Canada is aiming to limit the number of temporary residents in the country to 5% of the total population over the next three years.

This is due to concerns about the impact of explosive population growth on infrastructure, particularly housing. This move could have significant implications for economic growth, the country's deficit and debt, as well as the federal budget. While it may slow growth in the working-age population and real gross domestic product, it could also lead to lower revenues, larger deficits, and higher debt.

The Federal Budget 2024 assumes high population growth, but does not explicitly incorporate the planned reduction in non-permanent residents, posing risks to its real GDP forecast. According to Randall Bartlett, senior director of Canadian economics at Fédération des caisses Desjardins du Québec, the deficit could increase by nearly $8 billion a year higher than the Budget’s baseline when applying the lower population growth forecast provided by Statistics Canada. The government's pledge to increase defence spending could further add to the deficit, putting the federal government’s fiscal anchors at risk. Despite these concerns, the Canadian economy beat expectations in May, with gross domestic product (GDP) rising by 0.2% in May, putting the second quarter on track for annualized growth of 2.2%.

The recent downturn in the Canadian economy has been compared to near-recession-misses in the early 2000s and 2015-16, with goods industries weakening but not plunging, and the services sectors managing to keep growing. In addition, the article provides information on upcoming data releases and earnings reports, as well as links to other articles and resources for further reading.

Source: https://financialpost.com/news/canada-immigration-clampdown-could-raise-deficit-debt