Anyone keeping an eye on Canadian news will have noticed that the country’s economic situation is not as favorable as it once was, with many residents grappling with economic challenges including inflation.
Like many other countries, Canada has suffered from economic downturns and inflation resulting from the COVID-19 pandemic. Under such conditions, it is expected that the country’s economic situation would be less than ideal. Canada, especially in 2023, experienced a very difficult year with unprecedented inflation rates. However, effective management by provincial and federal governments has prevented a complete economic collapse, with Canada experiencing some of the least damage among advanced economies in the Americas (G7).
As we approach the end of 2024, the question arises: What is the current state of the economy? Any prospective immigrant not only has the right but also should assess the economic conditions of their destination country before moving to ensure that living there will truly be beneficial.
In this article, we at Sarafi Hafez aim to analyze Canada’s economic trends for 2024 based on available statistics and information to determine whether the country still remains one of the best immigration destinations in the world.
Economic Trends in Canada for 2024
So far in 2024, Canada’s economy has performed better than expected. The Canadian government has successfully avoided a recession, which some experts had predicted, despite rising interest rates.
Inflation in Canada has decreased from its peak of 8.1% in June 2022 to 2.9% in January and 2.8% in February 2024. Despite this, the job market remains strong, with more than 1.1 million additional people employed compared to the pre-pandemic period. This indicates the fastest employment recovery among G7 countries.
Additionally, real wages (adjusted for inflation) have increased, resulting in greater purchasing power for Canadians.
Statistics show that despite the difficulties of the past two years, Canada’s economy is still growing in 2024. Statistics Canada has reported that the Gross Domestic Product (GDP) in January increased by 0.6% (7.4% annualized). The economic growth for the first quarter of 2024 was approximately 3.5%, which is a very positive figure.
The federal government has supported its citizens robustly, leading Canada to have the lowest net debt-to-GDP ratio and the smallest budget deficit among G7 countries.
Also read: A Guide to Investing in the Canadian Stock Market
Canada’s Economy Performing Better Than Expected
Canada’s economy has performed better than forecasts in 2024, managing to grow despite a rapid and significant rise in interest rates. Although the growth rate is slow, it remains positive. The country has managed to increase its GDP by 1.1% this year, which is more than three times the predicted 0.3%.
Despite some disruptive factors such as the Quebec public sector strike in late 2023, Canada was able to increase its GDP by 1% in the fourth quarter of that year. Economic indicators for 2024 are also promising.
The country has achieved a GDP growth rate of 7.4% for the year and reached an annual economic growth rate of 3.5% in the first quarter of 2024. In recent months, household and small business sentiments have been more positive, and greater economic stability has been felt within the community.
Canada’s strong economic fundamentals have helped mitigate the negative effects of high global interest rates, thanks in part to its robust labor markets. Support from the United States has also positively impacted the country’s inflation balance.
Significant Progress in Bringing Inflation Back to Target
The COVID-19 pandemic and international conflicts led Canada to experience unprecedented inflation and an economic shock over the past two years. Despite these challenges, the country has managed to reduce inflation from 8.1% in 2022 to 2.8% in February 2024.
In response to rising inflation, the Bank of Canada rapidly increased its benchmark interest rate by 4.75 percentage points, raising it to 5% by July 2023, where it remains. The reduction in energy prices and the easing of global supply chain challenges have been key factors in the significant decrease in inflation since the second half of 2022.
As of 2024, Canada’s inflation has remained within the Bank of Canada’s target range of 1% to 3% over the past two months. However, progress in reducing inflation has been uneven across different sectors. Housing has seen the highest inflation, but forecasts suggest it will gradually decrease to 3% and eventually 1%.
Despite recent improvements in inflation control, some essential household costs, such as food and housing, remain high. Addressing these challenges in the long term will require targeted policies to resolve structural issues that are the main drivers of the high cost of living for Canadians.
Food price inflation has decreased from a peak of 11.4% in January 2023 to 2.4% in February 2024. This marks the first time that food prices have increased at a slower rate than overall inflation. However, food prices have still risen by about 19% since October 2021. In response, the government has introduced new targeted assistance to expand school food programs across the country to help Canadians manage the rising cost of food.
Housing costs are similarly high. Rent inflation averaged 6.4% in 2023 and reached 8.2% in February, which is a significant amount for Canadians. Mortgage interest costs have also increased sharply, and many Canadians needing to renew their mortgages this year or next will face a substantial rise in their monthly payments.
Despite this, the Canadian government has implemented special programs to control housing inflation.
Building More Homes
For many Canadians, whether in large cities or small towns, owning a home now seems like an elusive dream. The increase in rent has also made finding affordable housing more challenging.
The pressure on housing prices in Canada is not solely related to external factors and global inflation but also stems from a long-standing shortage of new housing supply relative to demand.
For decades, new home construction in Canada has faced serious obstacles, including zoning restrictions, lengthy permitting processes, and a shortage of skilled labor, resulting in slow progress. As a result, the vacancy rate has decreased, and the prices of buying and renting homes have increased. Additionally, the recent rapid population growth (due to immigration) has increased housing demand and placed additional pressure on the Canadian government to accommodate newcomers effectively.
Controlling housing inflation in Canada requires a significant increase in the supply of new homes. The federal government is investing more, attracting and retaining construction workers, and reducing complex administrative red tape to accelerate housing construction across the country. These investments have been impactful, particularly in reducing rental costs.
In the 2024 budget, the Canadian government has planned various measures to reduce barriers to new housing construction and aims to lower the costs of buying and renting homes.
Also read: A Review of the New Tax Policies in Canada and Their Impact on Businesses
Canada’s Job Market in 2024
Nothing is as crucial for personal well-being as having a good job. Even with slowing economic growth and rising interest rates, Canada’s job market remains strong.
The unemployment rate in 2024 (so far) is 6.1%, which is relatively good, though not the best in Canada’s history. This is while hiring speeds have slowed, and the number of job opportunities has decreased in recent months.
The growth of skilled labor and high workforce participation, particularly among women, has helped Canadian businesses fill their vacant positions. With new government support and the establishment of childcare systems, women have become significant contributors to the workforce, occupying a substantial portion of jobs. This has increased pressure on the job market and expanded the workforce.
Having a strong job market is also important for controlling prices. Worker wages have increased over the past 13 months at a rate that outpaces inflation. On average, real wages (wages adjusted for inflation) in Canada are now higher than the pre-pandemic average.
Overall, Canadian workers’ income has increased by 4.6% since 2019, with purchasing power rising accordingly. In other words, a skilled worker in Canada today can buy the same amount of goods for CAD 1,270 that they could have purchased for CAD 2,900 in 2019.
To maintain positive wage rates, the Canadian government needs to boost its production capacity. Therefore, a significant portion of the 2024 budget focuses on investing in increased productivity and production growth.
Different Sections of the 2024 Budget
In the face of fundamental economic changes, including shifts in global trade dynamics and the growth of the digital economy, Canada is undergoing rapid transformation and feels a greater need to boost productivity than ever before.
The Canadian government is taking steps to attract business investments, reduce bureaucratic regulations, and draw in foreign capital across various economic sectors. These efforts are aimed at providing the necessary confidence for foreign businesses to invest in Canada, designed with the goal of encouraging their participation.
This decision will enhance Canada’s economic productivity while creating more high-wage jobs for Canadians. The federal government has pursued several key objectives in planning the 2024 budget:
- Increasing Research, Innovation, and Productivity
- Promoting Clean Economic Growth
- Supporting the Expansion of Both Large and Small Businesses
- Reducing Bureaucratic Processes (Permit Issuance Procedures) to Foster Innovation and Business Growth
- Fostering Inclusive Growth with Equal Opportunities for All
- Optimizing Macroeconomic Management
- Leveraging All of Canada’s Economic Potential
Canada has faced challenges in productivity growth (the income generated per hour worked) in recent years. Therefore, expanding the productive capacity of the Canadian economy and overcoming these challenges is crucial. The key to this endeavor is utilizing all of Canada’s economic potential, building business confidence for investment, and expanding connections with emerging markets.
In 2024, the Canadian government has made significant investments to create a stable and reassuring environment where businesses can trust in investing in the country. These investments are focused on sectors such as healthcare, early childhood education and care, job creation for new immigrants, increasing housing supply, and supporting foreign investments.
Canada has been successful in injecting a significant number of women into the workforce by supporting childcare centers, achieving a world-leading participation rate of 85.7%. Simultaneously, the government has increased investment in the oil and gas industry, working to secure necessary infrastructure for extraction and transportation. The country is also becoming a global hub for electric vehicle and battery production.
Also read: Salaries and Income in Canada: Average Monthly Wage
In Conclusion
A general overview of Canada’s economic trends in 2024 reveals that the country is undergoing a recovery phase following the impacts of the COVID-19 pandemic while still grappling with inflation. Although Canada has managed to significantly control general inflation and reduce it to below 3% in 2024, it continues to face challenges such as high housing costs and rental rates. The issue of high housing costs remains prevalent, with improvements compared to previous years but still not reaching ideal conditions.
On the other hand, the increase in the workforce and the more significant presence of women in the labor market has led to a reduction in job opportunities and a slight increase in the unemployment rate.
These challenges have prompted the federal government to open its doors to foreign investors interested in creating jobs for Canadian workers, offering specialized investment immigration opportunities. Overall, Canada is in a more favorable position compared to many other countries and is on an upward growth trajectory. Despite various challenges, Canada continues to have a dynamic economy in 2024 and remains one of the top destinations for immigration.
Frequently Asked Questions
Is living in Canada expensive?
The cost of living in Canada depends on the city you reside in. Generally, while it is not extremely expensive, it is not cheap either. However, if you are employed, your salary should adequately cover your needs even in the face of inflation.
Can I find a job in Canada?
Although job opportunities have slightly decreased, there are still various positions available across the country that are ready to hire.
What will the situation in Canada be like in the coming years?
Canada’s economic outlook is positive, with inflation expected to decrease significantly over the next four years. This makes it a very favorable opportunity for investment.
