Challenges ahead for Canadian economy

By The IJ Staff | July 03 2017 11:30AM

Photo: Freepik

The economy is expected to see strong growth throughout 2017, however, an aging population will constrain growth in the years to come, says a new report by The Conference Board of Canada.

The Canadian economy’s average annual growth rate has declined. In the two decades preceding the 2008-2009 recession, growth was at 2.7 per cent. It is expected to average around 1.8 per cent over the next 20 years, says the report.

Slow growth trajectory

"This year's well above 2 per cent real GDP growth is a temporary reprieve from Canada's future slow growth trajectory,” says Matthew Steward, associate director, National Forecast, The Conference Board of Canada. “By leaving the labour force in large numbers, the baby boom cohort will transform Canada's economy, shrinking growth in the pool of available labour and slowing the economy's trend growth (referred to as potential growth) over the next 20 years. This will have major implications for Canadians, businesses, and all levels of government.”

The Canadian economy will see growth well above two per cent in 2017, however, this is a “temporary acceleration” says the report. This rate will slow due to aging baby boomers leaving the work force. Immigration will be key to compensating for this trend.

Business investment

In addition, The Conference Board sees a strong long-term growth outlook for business investment despite weak performances in the sector recently. This is because firms will substitute capital for increasingly scarce labour, says the report.