Canada is facing major economic changes due to an aging population and a sharp decline in immigration, according to the Bank of Canada. After a period of rapid growth early in the decade, with an annual population growth rate of 3%, the country is now experiencing its slowest growth rate in over a century, just 0.5% by 2025. This shift follows a federal decision in 2024 to cut immigration levels, which is expected to have lasting economic impacts.
The report warns that fewer immigrants and an older population will shrink the workforce, alter consumer spending, and reduce overall economic productivity. “In the coming years, fewer new immigrants will arrive. Canadians will also continue to get older. This will affect the size of our workforce, what we buy and how much the economy can produce,” the analysis states. The housing sector, which reacts slowly to demographic changes, may see reduced demand, potentially easing housing pressures but slowing broader economic growth.
As Canada’s median age rises from 26 in 1971 to over 40 by 2026, consumer habits will shift. Retiring baby boomers will drive demand for travel, healthcare, and adaptive living products, straining the universal healthcare system. The report also warns of labor shortages as fewer young workers enter key industries, which could push wages higher and fuel inflation.
Overall, Canada’s economic future hinges on managing these demographic challenges, which will reshape the country’s economy for years to come.