While Canada’s headline economic growth over the past decade looks solid, it’s been mostly driven by population growth; on a per capita basis, the past 10 years looks like a “lost decade,” says National Bank Financial Inc. (NBF).
In a new report, the firm said the post-pandemic recovery in Canada has been second only to that of the U.S., among G7 countries. Also, over the previous 10 years, growth ran ahead of Europe and Japan, once again trailing only the U.S.
“What has Canada done right? The simple answer is we’ve ‘excelled’ at growing our population,” NBF said. The working-age population is up 16% over the past 10 years, it noted.
“For perspective, Canada’s working-age cohort has expanded by more than in Germany, Italy and France combined in the last eight quarters, despite an underlying population over five times smaller,” it said.
Per capita growth has been negative for five straight quarters, and for seven of the past eight quarters, it noted.
“Over the past decade, Canada has been at the back of the pack when it comes to per capita growth,” NBF said.
This weakness largely reflects a lack of investment, “the hollowing out here contributing to Canada’s lacklustre productivity record,” it said. It also noted that both consumer and government spending have done their part to drive per capita GDP growth over the period.
“We’re tempted to call the past ten years Canada’s lost decade, and we’re hoping that we’ll break out of the stagnation over the next ten,” the report said.
While plans to curb population growth will help, “one of the quickest and easiest ways to boost per capita GDP might be to lower interest rates materially to spur interest-sensitive demand,” the report said. “These data, and a slew of other key releases, indicate that this is clearly warranted.”