Canada: 2024 Article IV Consultation-Press Release; and Staff Report
IMF Staff Country Reports, July 16, 2024
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Bibliographic details
- Published: July 16, 2024
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9798400279966.002
Key findings and macroeconomic assessment
- The Canadian economy appears to have achieved a soft landing: inflation has come down almost to target, while a recession has been avoided.
- Gross domestic product growth was cushioned by surging immigration even as per capita income has shrunk.
- Housing unaffordability has risen to levels not seen in a generation, with demand boosted by immigration and supply facing continued challenges to expansion.
- Canada’s recent introduction of quantitative fiscal objectives is welcome and could be followed by adoption of a formal fiscal framework to anchor fiscal policy even more effectively.
- The authorities’ multipronged approach to address housing affordability is expected to yield results over time, but further efforts will likely be needed at all levels of government to address the large housing supply gap.
- Boosting Canada’s lagging productivity growth is a key priority for the country’s long-term prospects.
Housing affordability and supply
- Housing unaffordability has risen to levels not seen in a generation.
- Drivers:
- Demand boosted by immigration.
- Supply facing continued challenges to expansion.
- Policy outlook:
- The authorities’ multipronged approach is expected to yield results over time.
- Further efforts will likely be needed at all levels of government to address the large housing supply gap.
Fiscal policy and frameworks
- Recent policy development:
- Introduction of quantitative fiscal objectives.
- Recommendation:
- Consider adoption of a formal fiscal framework to anchor fiscal policy more effectively.
Productivity, technology, and investment
- Priority: Boosting Canada’s lagging productivity growth.
- Recommended actions:
- Promote investment and R&D.
- Harness artificial intelligence and other advanced technologies (within appropriate guardrails).
- Capitalize on the green transition.
Labor, migration, and demographics
- Immigration has been a critical ingredient supporting GDP growth.
- Given skills gaps and demographic pressures, immigration remains essential for growth and labor market outcomes.
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