Former Bank of Canada governor Stephen Poloz said Canada’s economy is in a recession, with its weak economic growth being propped up by large-scale immigration.
“I would say we’re in a recession. I wouldn’t even call it a technical one,” Poloz said during a Dec. 3 webinar.
Poloz, who served as Bank of Canada governor from 2013 to 2020, said the technical definition of a recession—two consecutive quarters of negative GDP growth—is a superficial one. He said Canada’s economy has not hit this definition because Canada has brought in a large number of immigrants who boost consumption and therefore drive up the GDP. But per capita GDP figures paint a different picture.
Canada’s population
increased from 38 million in July 2020 to an estimated nearly
41.9 million as of Dec. 6, 2024. The Canadian government in October announced it would
reduce its immigration targets from 500,000 new permanent residents in each of the next two years to 395,000 in 2025 and 380,000 in 2026, and further to 365,000 in 2027. There have also been many people coming to Canada with other types of visas, such as as students or temporary workers.
“It’s almost like swimming naked while the tide is rising, and no one knows,” Poloz said. “Once the tide starts going out, it’s going to become clear very soon. And that’s what I think is the situation we’re in.”
The Canadian economy grew by 0.4 percent in the first quarter of 2024, after seeing no change in the fourth quarter of 2023, according to a
Statistics Canada report from May 2024. However, the agency reported in its weekly review published Nov. 29 that the country’s per capita GDP had declined for the sixth quarter in a row, falling by 0.4 percent in the third quarter of 2024.
Poloz said this was due to an approximately 30 percent rise in the cost of living, which has reduced “the spending you have available for discretionary items,” coupled with Canadian wages not keeping up.
The former Bank of Canada governor also noted that overall GDP growth has been low. The economy grew by 2.1 percent at an annualized rate in the
second quarter of 2024, before falling to 1 percent annualized growth in the
third quarter.
“We did have one pop-up in the previous quarter, but that was a pretty minor thing and the only good news. What caused that is government spending. That’s not the sort of thing to build your recovery on. So it means we are in a recession, the way I see it,” he said.
As well, Poloz spoke about U.S. President-elect Donald Trump’s threat to put 25 percent tariffs on Canada and Mexico if the two countries do not secure their borders. This could raise inflation in Canada and lower the dollar’s value further, Poloz said. The current U.S.-to-Canadian currency
exchange rate is around 1.4, with one Canadian dollar worth just US$0.71.
Additionally, Poloz said these tariffs might force the Bank of Canada to keep interest rates higher, even if economic growth is slowing and inflation is rising. “What do you do? I think most central banks are going to say, ‘Well, I gotta be worried about the inflation part.’ And so that’s a recipe for deeper stagflation,” he said.
Also recently, Bank of Canada senior deputy governor Carolyn Rogers warned that the weak productivity rate in the country is an economic “
emergency.”
Rogers’s warning and Poloz’s comments on Canada being in a recession were
highlighted by Conservative MP Michael Chong in the House of Commons on Dec. 5.
“When will the government start listening to the experts and understand that its policies on its budgets, its spending, and its deficits, whatever the number is, have caused a recession and an economic emergency?”
Parliamentary Secretary to the Finance Minister Rachel Bendayan responded that Canada has not met the official definition of a recession and that Statistics Canada
revised the country’s GDP numbers from 2021 to 2024 upwards. “This Liberal government has ensured a very strong recovery, the strongest in the G7,” Bendayan said.
