Immigration has kept Canada’s economy afloat. What will coming cuts mean?

The federal government said it would reduce the number of new permanent residents by 21 per cent by next year, with further cuts in the following two years.

As Canada looks to cut immigration numbers in the next few years, Canadians may be wondering what those shifts to the population could mean for the risks of a recession.

Experts and federal officials over recent years have pointed to high population growth, due in large part to immigration, as a factor that has helped Canada avoid an economic downturn.

“We were of the view that the Canadian economy likely would have experienced a recession in 2023 had it not been for the decades-high population growth that we saw in 2023 (and) 2024,” said Randall Bartlett, senior director of Canadian economics at Desjardins.

In January, the financial institution along with other economists had suggested a short and shallow recession was possible in the first half of the year, though as time went on that didn’t come to pass.

Bartlett said Desjardins is anticipating real GDP (gross domestic product) growth of about 1.5 per cent annualized in the third quarter of 2024, and about two per cent in the fourth. The Bank of Canada itself forecasts GDP growth of 1.5 per cent in 2024 and 2.2 per cent in 2025.

On Thursday, however, the federal government announced it would reduce the number of new permanent residents by 21 per cent by next year, with further drops the following two years.

Bartlett cautions there remains uncertainty in what comes next for Canada’s economy.

“What we see is that it really is a trade-off between population growth that we’re expecting to see and per capita, real GDP growth,” Bartlett said.