Flow of temporary residents key to Canada’s economic fate: Desjardins

A drop-off in the flow of non-permanent residents coming to Canada in the years ahead could deepen a forecasted economic downturn, but a push to keep levels high would come with its own consequences, Desjardins is warning.

A report from the financial institution released Wednesday examines the impact of incoming temporary workers and international students on the country’s economy.

Non-permanent residents (NPRs) like these have been the lifeblood of Canada’s population surge, notes author Randall Bartlett, senior director of Canadian economics at Desjardins. The pace of NPR inflows is set to decline in the years ahead, he argues, as Canada’s economy cools and demand for labour slows.

But there’s a role to play for the federal government here too, in policies that either encourage or discourage immigration. For example, Ottawa said late last year that it would raise the financial burden on prospective students coming to Canada.

Desjardins is among the forecasters calling for a short and shallow recession in the first half of the year, and Bartlett warns that without any additional NPRs, that downturn could be steeper and last nearly twice as long as currently expected.

“Closing the door to temporary newcomers would deepen the recession expected in 2024 and blunt the subsequent recovery,” he writes.

“As such, caution is warranted on the part of policymakers to minimize the economic downside of slowing newcomer arrivals too quickly.”

Alternatively, Bartlett argued that “materially increasing the pace of NPR admissions” could raise Canada’s real gross domestic product this year to the point of avoiding a recession entirely.

While the Canadian economy contracted in the third quarter of 2023, baseline forecasts from some economists,