Canada’s economy is experiencing growth, bolstered by a resilient labour market, rising asset prices, and a decline in inflation, according to a recent AM Best report – creating a tailwind for insurers.
Despite these positive indicators, population growth is outpacing job creation, which has led to a slowdown in wage growth and a rise in the unemployment rate.
Housing affordability remains a pressing issue, exacerbated by significant increases in home prices, as detailed in Best’s Special Report on the Canadian economy.
In 2023, the country’s economic growth decelerated to 1.1%, a marked decline from the annual rate of 3.8% recorded in 2022. This slowdown was attributed to several factors, including the cumulative effects of higher interest rates, natural disasters, and reduced global economic activity.
The first quarter of 2024 saw a rebound, with growth reaching 1.7%, followed by an increase of 2.1% in the second quarter.
“However, the primary driver of growth was government spending, as consumer spending softened,” said Ann Modica, AM Best director.
Immigration trends have also influenced Canada’s economic landscape. The net increase of over one million temporary residents since the pandemic has contributed to population growth, which was estimated at around 3% in 2023, marking a multi-decade high.
However, projections indicate that population growth is likely to revert to historical averages in the near term, with expected rates of 1.0% in both 2025 and 2026. The government plans to reduce the number of worker visas and limit international student permits as part of these adjustments.
AM Best is a credit rating agency and data analytics provider specializing in the insurance industry. Headquartered in the US, it operates in more than 100 countries, with regional offices in key cities such as London, Amsterdam, Dubai, Hong Kong, Singapore, and Mexico City.
Read related story: How are Canada’s life insurers performing?
What are your thoughts on the current state of Canada’s economy? Share your opinion in the comments section.
