New challenges abound for 2025, says four senior economists for Farm Credit Canada: Leigh Anderson, Graeme Crosbie, Amanda Norris, Justin Shepherd.
Slower population growth will dent economic growth
After a rough couple of years, when real GDP growth averaged a meagre 1.5 per cent, Canada’s economy is unlikely to get much better this year. Reduced immigration levels are expected to slow population growth, significantly reducing potential GDP growth - the economy’s speed limit, which is estimated as the sum of available labour (i.e., population) growth and productivity growth.
The Bank of Canada currently estimates potential growth to be just 1.7 per cent in 2025, but even that seems optimistic given the central bank’s expectation of productivity bouncing back significantly this year (Figure 1). It’s unclear what will rekindle productivity, more so considering business investment has been treading water. With such a low speed limit, don’t count on Canada’s real GDP growth to bounce back significantly in 2025.
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