Rising numbers of immigrants and a partial focus on more potentially productive ones have expanded the workforce and boosted the economy
OTTAWA: Canada largely avoided the doldrums affecting other developed countries last year amid the global slowdown. Immigration is a big reason why.
long-term economic growth generally has two sources: a growing workforce and advances in productivity or output per hour worked. When more people are working, they produce more goods and provide services more, earn more and spend more, creating a demand for more workers.
Canada owes a relatively solid pace of economic growth in recent years for gains in the labor force rather than productivity, which has stagnated.
The Canadian labor force grew 2% last year according to data from the OECD, faster than the US and Japan, two of the other organization only has data available for 2019. Most of that is driven by population growth, about 80% of which comes from immigration.
The growing headcount, in turn, has supported growth in consumer spending and a rebound in home sales and prices that began during the second half of last year. That helped Canada overcome a sharp slowdown in trade, muted business investment, and a cooling global economy last year.
“Without immigration boom, the Canadian economy will be lost now,” said David Rosenberg, chief economist at Rosenberg Research and Associates based in Toronto. “It’s not just the main game in town, it’s the only game in town.”
In one year, economic growth is influenced by many factors. 2019 global slowdown largely the result of China trade tensions and loss of momentum. The US Federal Reserve and several other central banks responded by cutting interest rates or other stimulus measures. The US economy, which grew 2.3% last year, also benefited from the lingering effects of the new tax cuts and increased government spending.
Canada has enjoyed growth in a relatively high-population yearly average of about 1% since the early 2000s. It accelerates after the Trudeau government bumped up the rate of immigration in 2016, reaching 1.4% in 2018, the fastest among the Group of Seven developed countries, according to the World Bank. While the full 2019 figures are not available, a recent Canadian government estimates put the annual rate of 1.5% in the year ending in October.
Canada, with a population of 38 million, received about 340,000 new permanent residents in 2019, up from 270,000 in 2015. It also issued approximately 810,000 permits for international students and temporary workers in 2019, up from about 470,000 four years earlier.
Economists say that the inclusion of helping the Canadian economy expanding 1.5% in 2019, the second-best rate in the G-7 after the US, according to International Monetary Fund estimates. Trudeau government level higher than immigration has given the stimulus which is roughly comparable to the rate cuts between a quarter percentage point and a half point, the Bank of Nova Scotia economist Derek Holt said.
In contrast, economic growth was only 0.5% in Germany and 1.2% in the euro area as a whole, according to the IMF, where a wave of asylum seekers has hardened public attitudes on immigration.
However, last year marked loss of momentum in the midst of a global slowdown. From 2010 to 2018, Canada’s annual growth in gross domestic product average of 2.2%, slightly below the US and over the rest of the G-7, according to the World Bank.
The Bank of Canada has maintained its benchmark overnight interest rates since October 2018 amounted to 1.75%, the highest among major developed countries. Many analysts are now looking at the possibility of increased central bank interest rate cuts this year, including the possibility by Canada, because of the risk of an outbreak of coronavirus for global growth. The next Bank of Canada interest rate announcement is due on Wednesday.
One of the residents how to bolster economic growth Canada is through the housing market. house prices rose again in Toronto and the surrounding area and have stabilized in Vancouver after the mortgage rules that aim to limit risky lending weighed on prices and sales in 2018 and early 2019.
“With more people living in the country, the demand for housing has naturally increased,” said TD Bank chief economist Beata Caranci.
Economists said Canada benefits from a system that gives preference to immigrants with the ability to find and keep a job, based on criteria such as education, language skills and whether they have a job offer. About 60% of immigrants to Canada are selected with these criteria, a figure that also includes close family members of those immigrants. The rest come as refugees or to be reunited with family members already in Canada.
Among the recent arrivals in Canada is Albert Cuesta Reig, a Spaniard who came in 2016 to complete a master’s degree in business administration at the University of Toronto. After receiving a three-year work visa he launched an app-based travel services business—something he says wouldn’t have been possible in the U.S., where he had studied for a year on an exchange program.
In the U.S., “they have amazing schools, but then it’s hard to stick around and make use of the network you’ve built there,” he said, blaming restrictive immigration rules. Mr. Cuesta Reig is now applying to become a permanent resident in Canada.
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