Canada's economy to slow with new limits on temporary migrants

Canada’s planned reduction in temporary residents is set to add downward pressure to inflation and economic growth in the coming months, and the policy will likely halve its population growth rate when it takes full effect next year, economists say.

Prime Minister Justin Trudeau’s government plans to reduce the number of temporary immigrants by 20 per cent over the next three years, bringing the level down to 5 per cent of the population from 6.2 per cent currently. Starting in May, the government will make it harder for firms to rely on temporary foreign workers.

With one of the world’s fastest rates of population growth, the country has benefited from quickly expanding its labour force. But the rapid increase, driven primarily by foreign workers and students, has led to growing anxiety about housing shortages and the cost of living, prompting the Trudeau government to scale back its open immigration policies.

“This policy would have a material impact on the economy moving forward,” Royce Mendes, head of macro strategy at Desjardins, said in a report to investors. “The combination of a highly interest-rate sensitive economy and the likelihood of slower population growth are the main reasons we have been more bearish on the medium-term outlook for the Canadian economy.”