Amid concerns about the strain on housing markets and infrastructure from Canada’s fast-rising population, the federal government is taking action to stem immigration, and while there are signs that these levers are starting to work, the overall picture remains largely unchanged, according to economists at Desjardins Group.
In a new report, Desjardins examined the latest demographic data in light of the federal government’s commitments last year to shrink the share of non-permanent residents in the overall population (down to 5% from 7.4% in the third quarter of 2024), and reduce its targets for new permanent residents.
“If achieved, these lower immigration levels could cause Canada’s population to shrink for the first time since World War II,” it noted.
So far, the early data indicates that these policies are starting to work, the report said.
“Population gains have cooled in key segments and the influx of new non-permanent residents has slowed,” it said, with the number of international students and temporary foreign workers declining sharply.
However, the report also noted that the flow of new permanent residents hasn’t eased yet, and the government is still a long way from its 5% target for non-permanent residents (NPRs) — so its population projections are “mostly unchanged” at this point, Desjardins said.
“Despite slight revisions in the short‐term, our long‐term population projection suggests that the government will require more aggressive reductions in NPR numbers to reach its ambitious target by the end of 2026,” it said.
Desjardins said it also remains skeptical that the federal government will reach its existing immigration targets.
“Corporate Canada has expressed concerns regarding labour shortages and could put pressure on the government to moderate some of its new policies, especially as job vacancies remain high in some industries,” it said. The effort is also having other negative effects, such as straining the finances of post-secondary institutions that have relied heavily on international students, it added.
Meanwhile, in sectors that need temporary foreign workers, a drop in available labour is “likely to push wages higher, potentially impacting inflation in labour-intensive goods and services,” it said.
For now, Desjardins said that it plans to “monitor the situation closely and revise our outlook as the data on immigration evolves.”