Canada’s Strong GDP ‘Misleading’ by Not Adjusting for Soaring Population Growth: Fraser Institute

Canada’s Strong GDP ‘Misleading’ by Not Adjusting for Soaring Population Growth: Fraser Institute
A Canadian flag hangs from a lamppost along the road in front of the Parliament buildings ahead of Canada Day, in Ottawa on June 30, 2020. (The Canadian Press/Adrian Wyld)
Isaac Teo
While Canada’s governing politicians have often used gross domestic product (GDP) growth as evidence of strong economic performance and successful policy, a new study says if the cited figures don’t account for population changes, they present a “misleading picture.”
“Canadian governments of all stripes have for many years touted Canada’s economic growth using the overall GDP growth rate. But because of Canada’s massive spike in population in recent years, not adjusting GDP growth for population changes provides a misleading picture of the country’s economic performance,” said study co-author Ben Eisen, a senior fellow at the Fraser Institute, in a news release on April 11.

The study said the media and political analysts have also frequently relied on GDP growth as a metric to assess Canada’s economic performance relative to other countries and over different time periods.

“But due to large differences in population growth among developed countries, and Canada’s recent immigration-fuelled population surge, it’s now more useful to use per-person GDP (a common indicator of living standards) to measure economic performance,” the release said.

‘Near the Bottom’

An example from the study shows that between 2000 and 2023, Canada had the second-highest rate of overall GDP growth in the Group of Seven (G7) countries.

“However, after adjusting for population growth, Canada’s per-person GDP growth rate over the same period is near the bottom of the group and well below the G7 average,” the think tank said.

Without adjusting for population growth, Canada’s annual GDP growth rate was 1.8 percent over that period, the authors calculated—just behind that of the United States (1.9 percent). That rate also exceeded the G7 average of 1.4 percent and surpassed the UK (1.4 percent), France (1.1 percent), Germany (1.1 percent), Japan (0.6 percent), and Italy (0.2 percent).

After making the adjustment, comparing GDP growth per person instead, Canada’s real per-person GDP growth rate turned out to be 0.7 percent—worse than the G7 average of 1 percent and trailing further away from the Americans’ 1.2 percent. Germany (0.9 percent) and the UK (0.8 percent) also fared better than Canada. Japan and France tied with Canada at 0.7 percent while Italy trailed behind (0.1 percent).

The authors said the “widespread and frequent” reference to Canada’s overall GDP growth rates “does more to obscure public understanding of Canada’s economic performance than it does to enlighten it.”

They cited the example of federal Finance Minister Chrystia telling Parliament on June 19, 2023, that “both the IMF [International Monetary Fund] and OECD [Organisation for Economic Co-operation and Development ] have forecast that Canada will have the strongest economic growth in the G7 this year and next year.”

“Prime Minister Justin Trudeau’s government in particular frequently makes use of this metric,” the authors wrote.

They noted that former Prime Minister Stephen Harper, who led the Conservative government from 2006 to 2015, similarly used international comparisons of GDP growth as evidence of successful economic policy.

This was prior to the 2000–23 period examined in the study, during which Canada had by far the fastest population growth rate in the G7. It grew at an annualized rate of 1.1 percent, more than twice the rate of the G7 as a whole (0.5 percent) and much faster than that of the United States (0.7 percent). During that period, Canada’s population rose by 29.8 percent, compared to growth of just 11.5 percent in the entire G7.

‘Nearly Stagnant’

The study also tracked Canada’s rate of economic growth under the leadership of Mr. Trudeau and his four predecessors.

“This metric shows that the rate of economic growth in Canada has been slower in recent years than in earlier historical periods,” it said.

Growth during the tenures of Mr. Justin Trudeau (1.6 percent) and Mr. Harper (1.5 percent) have been much lower than that under Brian Mulroney (2.1 percent), Jean Chrétien (3.4 percent), or Paul Martin (3 percent), the authors wrote.

When adjusted for population, the study says real per-person economic growth has been “nearly stagnant” since 2015 under the Trudeau government, averaging just 0.3 percent.

This is down from 0.5 percent during Mr. Harper’s time in office. Per-person growth rates on average were even higher in previous historical periods0.8 percent under Mr. Mulroney, 2.4 percent under Mr. Chrétien, and 2 percent under Mr. Martin.

“When judging Canada’s economy, it’s crucial to accurately measure economic performance and living standards so Canadians are not misled,” Mr. Eisen said.