Immigration target unlikely to be met this year - Capital Economics
Canada Economics

Immigration target unlikely to be met this year

Canada Economics Weekly
Written by Stephen Brown
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The government signalled its commitment to its new immigration target this week, but disruption from the pandemic will probably prevent immigration from picking up meaningfully until at least the end of 2021.

The government signalled its commitment to its new immigration target this week, but disruption from the pandemic will probably prevent immigration from picking up meaningfully until at least the end of 2021.

It is not often that the bi-weekly Express Entry draws for permanent residency applications make the headlines, but they did this week following the government’s decision to invite over 27,000 people to apply with a cut-off score of just 75 out of 600 points. Applicants normally need around 470 points to be eligible and the number of invitations issued was 23,000 more than the previous bi-weekly record.

Due to travel restrictions, the invitations were offered only to those people that have Canadian work experience, the majority of whom are already in the country. Given an applicant scores 80 points just for having that work experience, the government has decided that, if someone is already in Canada and has found work, then they are welcome to stay.

The record-breaking draw will therefore not boost the current population, but it should still support future population growth by reducing the number of temporary visa holders who eventually return home. The bigger point is probably that the government has shown its intent to meet its new, higher target to attract more than 400,000 new permanent residents per year, up from 341,000 before the pandemic.

Even if the government finds a solution to allow more immigrants to travel to Canada this year, however, it normally takes a few months for applicants to collect their paperwork and then six months for those applications to be processed, so we would be surprised if the government managed to hit its targets this year. With over 800,000 people still out of work, that should not be much of an issue for GDP growth in 2021, which will be determined mainly by when containment restrictions are lifted.

Data provide mixed picture of activity in January

The latest restrictions unsurprisingly weighed on spending, with retail sales falling by 3.4% m/m in December and the preliminary estimate pointing to a similar-sized decline in January. (See here.) Developments in January were not all negative, however, as the data this week also showed that housing starts surged to 282,000 annualised, up from 229,000 in December. While starts are being supporting by strong housing demand, the size of the rise in January also reflected the unseasonably warm temperatures in Ontario and Quebec last month.

As well as strong activity in the construction sector, we already knew that Canada’s oil exports to the US rose to a record high in January. (See here.) Given the strength in those sectors not directly affected by the latest coronavirus restrictions, we think GDP will continue to rise in the first quarter, in contrast to the consensus forecast that it will decline. (See here.)

Some positive vaccine news

Despite some positive vaccine news this week, there does not seem to be much chance of the coronavirus restrictions being lifted any sooner than around the middle of second quarter, as we currently assume.

The government said that it has ordered a further four million doses from Moderna and updated its agreements with both Moderna and Pfizer to ensure that all 84 million doses are delivered by September. But, with no domestic production, Canada is still dependent on the kindness of strangers. Moreover, the delivery schedule for the first half of the year remains broadly unchanged – with 23 million doses due to arrive by the end of June and 61 million now coming in the third quarter. The revision to the contracts does at least raise the chance that Canada’s vaccination program will be completed by September, particularly if the other three vaccines currently under review are approved.

The week ahead

With no key data releases scheduled, the main event next week will be Bank of Canada Governor Tiff Macklem’s speech on Tuesday.


Economic Diary & Forecasts

Upcoming Events and Data Releases

Date

Release/Indicator/Event

Time EST (GMT-5)

Previous*

Median*

CE Forecasts*

Mon 22nd

No Significant Data Released

Tue 23rd

BoC Governor Tiff Macklem Speech

12.30

Wed 24th

No Significant Data Released

Thu 25th

No Significant Data Released

Fri 26th

Industrial Product Price (Jan)

(08.30)

+1.5%

Raw Material Prices (Jan)

(08.30)

+3.5%

Selected future data releases and events

Mon 1st

Current Account Balance (Q4)

(08.30)

-7.5bn

Manufacturing PMI (Feb)

(09.30)

54.4

Tue 2nd

GDP by Expenditure (Q4)

(08.30)

40.5%

GDP (Dec)

(08.30)

+0.7%(-2.8%)

Wed 3rd

Building Permits (Jan)

(08.30)

-4.1%

Labour Productivity (Q4)

(08.30)

-10.3%

Ivey Purchasing Managers Index (Feb)

(10.00)

48.4

*m/m(y/y) unless otherwise stated

Sources: Bloomberg, Capital Economics

Main Economic & Market Forecasts

%q/q ann. (%y/y) unless stated

Q4 2020

Q1 2021

Q2 2020

Q3 2021

Q4 2021

Q1 2022

2020

2021

2022

GDP

7.5

1.0

5.8

8.0

5.2

4.4

-5.4

5.2

5.0

CPI Inflation

0.8

1.4

2.6

2.4

2.2

1.8

0.7

2.2

1.8

Unemployment Rate (%)

8.9

8.6

7.5

7.1

6.9

6.4

9.5

7.5

6.0

Overnight Rate, End Peri’d (%)

0.25

0.25

0.25

0.25

0.25

0.25

0.25

0.25

0.25

10 Yr GoC., End Period (%)

0.60

1.0

1.15

1.25

1.50

1.55

0.85

1.50

1.75

USD/CAD, End Period

0.75

0.77

0.78

0.79

0.81

0.82

0.77

0.82

0.85

Sources: Refinitiv, Capital Economics


Stephen Brown, Senior Canada Economist, +1 416 874 0514, stephen.brown@capitaleconomics.com