In 2023 Canada’s economy exceeded expectations, with real GDP growing by 1.1%. 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 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%.
Likewise, in 2024 GDP is projected to grow 1.3% but GDP per capita is set to decline by 1%. Though most countries are projected to experience subdued growth in 2024 (with the exception of the US), Canada will be the only country to see an outright decline.
This means Canada is digging a hole from which it will need to climb out. Given current projections, we will not reattain 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. So, we know if the economy is growing stronger, or just bigger.
