In each EconMinute, Business Council of Alberta economist Alicia Planincic seeks to better understand the economic issues that matter to Canadians: from business competitiveness to housing affordability to living standards and our country’s lack of productivity growth. She strives to answer burning questions, tackle misconceptions, and uncover what’s really going on in the Canadian economy.
In 2023 Canada’s economy exceeded expectations, with real GDP growing by 1.1 percent. This growth was highlighted in the 2024 federal budget for not only being faster than originally projected but also outpacing many other G7 countries.
According to the latest outlook published by the International Monetary Fund (IMF), this trend is set to continue. Canada is projected to outpace many of its G7 peers in 2024 and lead growth in 2025.
But these numbers are misleading. A closer look at the data reveals a more concerning story of the country’s economic health. Looking instead at GDP per capita, the Canadian economy shrunk in 2023 and will continue to do so in 2024.
GDP per capita measures the total value created by the Canadian economy on a per-person basis. Essentially, if GDP per capita is rising, that means Canada is not just building a bigger pie; it’s creating a bigger slice of the pie for everyone.
But that’s not what’s happening. Despite Canada achieving the third highest level of GDP growth among G7 nations in 2023 (thanks to population growth), its per capita growth was the worst of any country, declining by 1.7 percent.
Likewise, in 2024, GDP is projected to grow 1.3 percent, but GDP per capita is set to decline by one percent. Although most countries are projected to experience subdued growth in 2024 (with the exception of the U.S.), Canada will be the only country to see an outright decline.
Graphic credit: Janice Nelson
Canada is digging a hole from which it will need to climb out. Given current projections, we will not regain our 2022 level of per person output until 2029.
This decline can be attributed to several factors—which go far beyond the scope of this EconMinute. But one takeaway is the importance of assessing growth on a per capita basis. It’s good to see organizations like the IMF increasingly reporting GDP per capita, but so too should other groups that run forecasts (e.g., Canada’s big banks) and ministries of government that report on the health of the Canadian economy. We need to know whether the economy is growing stronger, or just bigger.
This post was originally published by the Business Council of Alberta at businesscouncilab.com.
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Alicia Planincic is the Director of Policy & Economics at the Business Council of Alberta. She regularly provides insight and analysis on the Canadian economy, public finances, labour markets, equity and social mobility, and public policy.
