Immigration cuts to rein in Maritimes’ GDP growth in 2025

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Economic growth in the Maritimes will stall in 2025, according to a report by the Atlantic Economic Council, released Thursday, as curtailed population growth will offset the effects of increased spending due to declining interest rates.

Only neighbouring Newfoundland and Labrador will have better results than in 2024, the council said.

Employment in Atlantic Canada grew 3.4 per cent, or 34,000 jobs, from January through September, but the council expects employment growth to slow to less than two per cent next year.

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Ottawa’s recently announced cuts to the number of temporary foreign workers and new international students, and has also set a lower overall immigration target. The changes were made to ease pressure on the housing market, especially in the rental sector, but will create challenges for some employers and post-secondary institutions, the report said.

“Housing starts in the region were up 40 per cent year to date in September,” Patrick Brannon, senior researcher at the council, said in a release accompanying the report Thursday. “Increased housing starts, along with slowing population growth, will help limit further strains on housing markets.”

Job vacancy rates have fallen to pre-pandemic levels except in the construction and health-care industries because there have been more people available to work. But that’s about to change.

“Labour force shortages will likely re-emerge with fewer non-permanent residents,” Brannon said. “Continued in-migration is needed in Atlantic Canada to replace the retirement of older workers.”

Atlantic Canada’s labour force has long-term challenges due to an aging population, which is why immigration is needed.

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There are also productivity challenges since output has not risen in step with the number of people working. The report said productivity is declining in both the region and the country and that Atlantic business sector labour productivity in 2023 was only slightly above the 2010 level.

Newfoundland and Labrador’s economy is forecast to grow 2.6 per cent in 2024 and 2.9 per cent in 2025, largely as a result of oil production, but the rest of the province’s economy will slow. For example, the report said it could be a challenging year for the mining sector, although there is potential for growth.

The Valentine gold project, set to become Atlantic Canada’s largest gold mine, will start production in the second quarter of 2025. Other gold properties are also under development, as gold is expected to remain near its historical high of $2,500 per ounce.

Nova Scotia’s real gross domestic product (GDP) is expected to grow by 1.9 per cent in 2024 before slowing to 1.6 per cent in 2025. Major project spending there is forecast to increase 28 per cent next year to a record $8.5 billion. Electricity investment, including several wind farms, will be up by more than $900 million in 2025. The council said housing starts will remain strong in 2025, but slightly below their pace this year.

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Prince Edward Island will have the biggest drop in GDP growth, to 2.3 per cent in 2025 from three per cent this year.

Near-record population growth in P.E.I. helped drive strong wage gains and double-digit increases in housing investment. But the council is projecting population growth will be less than two per cent next year and employment growth will dip to 2.2 per cent in 2025. Unemployment is projected to increase to eight per cent.

New Brunswick’s real GDP growth is pegged at 1.5 per cent this year, but is expected to slow to 1.3 per cent in 2025. Exports were down almost to one per cent from January to August and are expected to worsen next year as the United States economy slows.

There’s also a big question mark hovering over the regional economy, one that should be settled Nov. 6.

The council said trade prospects would worsen if Donald Trump is elected as U.S. president and imposes sweeping tariffs against foreign imports as promised.

Lars Osberg, an economist at Dalhousie University in Halifax, said the Atlantic provinces and the rest of the country are right to be worried about a potential Trump victory.

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“We’re looking at a major election next week in the U.S. and Trump has promised to raise tariffs dramatically,” he said. “That’s a pretty big uncertainty to throw in the mix if he gets elected. That uncertainty will tend to depress investment and consumer confidence. It’s a big negative.”

Nationally, the council said GDP growth will fall to one per cent in 2025 as good economic news on interest rates is offset by smaller population gains.

Osberg said the region is in a way captive to national trends.

“The big driver of what’s happening here is what’s happening in the rest of the country,” he said. “We deviate from national trends to some degree, but it’s the national trend that kind of swamps the year-to-year variation locally.”

Still, he said people living in the region shouldn’t be too worried.

“We’re not as rich as Ontario or Alberta or some parts of the U.S., but we are very rich compared to most parts of the world in the sense of income in the sense of employment and education levels,” he said. “Our health-care system has really severe strains, but try getting health care in Sub-Saharan Africa.”

• Email: arankin@postmedia.com

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