Canada’s economy continues to grow, bolstered by a strong labor market, higher asset prices, and lower inflation, reports global credit ratings agency AM Best.
Analytics also notes that population growth is now outpacing job creation, slowing wage increases and raising the national unemployment rate.
Housing affordability remains a pressing issue due to the substantial rise in home prices.
In 2023, economic growth slowed markedly to 1.1%, down from 3.8% in 2022, as higher interest rates, natural disasters, and a global economic slowdown dampened growth.
The first quarter of 2024 showed gains in investment, consumption, and housing, with the economy expanding by 1.7%, followed by a 2.1% growth rate in Q2 2024.
AM Best attributed this growth primarily to government spending, as consumer spending showed signs of slowing.
The Bank of Canada began lowering the policy rate in Q2 2024, but the delayed effects of monetary policy and high interest rates will likely continue to constrain economic activity through much of 2024.
AM Best anticipates growth picking up later in the year and into 2025 as borrowing costs ease and private investment and household spending rebound.
Looking ahead, AM Best emphasized immigration’s impact on Canada’s economy. Since the COVID-19 pandemic, net immigration has increased by over 1 mn temporary residents.
Population growth in 2023 reached around 3%, a multi-decade high. However, it’s expected to return to a more typical rate of 1.0% in 2025 and 2026, as the government plans to reduce worker visas and limit international student permits.
