Increases in Immigration to Help Offset Effects of Population Aging: Canada’s Outlook to 2045

This annual economic forecast presents the highlights of the long-term national outlook.

Document Highlights

Our long-term outlook expects modest annual economic growth of near 1.7 per cent. Population aging will restrain growth in Canada’s labour force, in turn limiting income growth, household spending, and business investment.

The weak growth in Canada’s labour force combined with modest gains in investment spending will limit growth in Canada’s potential output to an average annual gain of just 1.6 per cent over the long term to 2045. Growth in potential output would be even weaker if not for the recent turnaround and positive outlook for total factor productivity.

Steady gains in immigration will help to partially mitigate trends in the Canadian-born population. By around 2032, growth in Canada’s labour force will start to pick up steam again, and the participation rate will increase once the baby boomers have fully withdrawn from the workforce.

The outlook assumes the current bout of high inflation will not persist through most of the medium and long term, as the current disruption to global supply chains will ease. Consumer prices are expected to increase at an annual pace of 2.0 per cent through 2045.

Although fiscal deficits will decline from current record highs, they will persist over the long term, and the federal government will be in a deficit position for most of the next two decades. Financing these deficits is manageable now, but this will change when interest rates start to increase.

Sluggish gains in household spending will be linked to weak growth in employment and income. The pandemic-linked surge in spending on durable goods and the collapse of spending on services, particularly travel, won’t last. Canadians will spend more on services like health care and less on durable goods as they age.

With no major investments in the oil and gas sector planned for after the LNG Canada project is completed in 2025, new spending will be primarily to maintain existing operations and clean up the industry by investing in carbon capture and storage technologies.