Canada’s Per Capita GDP Falls to 2017 Levels: StatCan

A sign outside a building at Statistics Canada in Ottawa on March 12, 2021. (The Canadian Press/Justin Tang)

Canada’s per capita Gross Domestic Product (GDP) has fallen to 2017 levels amid slower economic growth and record population increases, according to a new report by Statistics Canada.

“Real GDP per capita has now declined in five of the past six quarters and is currently near levels observed in 2017,” reads the report, “Canada’s gross domestic product per capita: Perspectives on the return to trend.”

“Recent declines in per capita output have also brought concerns over Canada’s weak productivity performance to the fore, since historically, much of the long-term growth in GDP per capita has reflected sustained improvements in labour productivity.

The report notes that while Canada’s GDP per capita grew by about 1.1 percent yearly since 1981, the COVID-19 pandemic led to its fall of 7 percent below the long-term trend. In real dollar amounts, that means it declined by around $4,200 per Canadian after 2020.

Economic activity slowed in 2023 as businesses and households adjusted to higher interest rates, leading GDP to grow by just 1.1 percent that year. The report noted this growth was mostly driven by increases in exports and household spending, while lower business investment and a fall in residential housing construction negatively impacted gains.

For Canada to return to its pre-pandemic GDP per capita trend over the next decade, the measure would need to grow by a yearly rate of 1.7 percent, according to the report. It said that level of per capita growth would be “ambitious and a marked departure from recent trends.”

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Jack Mintz, president’s fellow at the University of Calgary School of Public Policy, said while 2015 saw Canada’s economy harmed by lower oil prices and falling investment, it was “not the same as structural problem(s) since 2021 with GDP per capita falling in general.”

Mr. Mintz told The Epoch Times that the most recent federal budget, which proposes $53 billion in new spending over the next five years, discourages more investment due to businesses expecting tax increases. “And they got that this budget with the capital gains tax increase, which confirms their concerns,” Mr. Mintz said in reference to the proposed increase to the capital gains inclusion rate.

Falling Productivity

The report said that previous periods of high GDP per capita growth, such as from 1991 to 2001, coincided with sustained improvements in labour productivity, the widespread adoption of information and communication technologies, and the implementation of the Canada–U.S. Free Trade Agreement.

Improvements to labour productivity would be “critical” to raising Canada’s GDP per capita, as they accounted for 93 percent of the growth over the last four decades, according to the report. “Structural trends in the labour market related to work intensity and population aging suggest that productivity will remain the key driver of GDP per capita in the post‑pandemic era,” the report says.

In order to improve Canada’s productivity, capital spending would need to increase. The report suggests that attracting higher levels of capital investment could also spur productivity growth and lower “market-related barriers that limit innovation and competition,” therefore reducing potential declines in Canadians’ living standards.

Canada’s falling productivity was also recently flagged by former Bank of Canada Governor Mark Carney, who warned Canadians’ prosperity would fall if the issue was not dealt with.

“What we should be doing as Canadians, we should first acknowledge that we have less to spend because we have become less productive ... and unless we turn that around, Canadian prosperity for all Canadians will be severely compromised,” Mr. Carney said during a keynote address at Canada 2020’s Economic Lookahead dinner in Toronto on April 22.

The Bank of Canada has also recently highlighted the risks posed by Canada’s falling productivity, with senior deputy governor Carolyn Rogers warning that the issue had reached emergency levels. Ms. Rogers said an economy with low productivity could “only grow so quickly” before inflation begins to set in.

“You’ve seen those signs that say, ‘In emergency, break glass,’” she said in a speech last month. “Well, it’s time to break the glass.”