this video was brought to you by nebula for most of the past 15 years Canada's economy has been the Envy of much of the developed World Canada weathered the 2008 financial crash perhaps better than any other developed country and its impressive GDP stable Progressive politics and general Good Vibes meant that it was widely considered to be one of the most liberable countries in the whole world however today things don't look quite so Rosy the headline numbers are still pretty good Canada's GDP is has grown faster than basically any other G7 country apart from the US since the pandemic but scratch the surface and it quickly becomes clear that Canada doesn't live up to its International reputation productivity is stagnant GDP per capita is actually falling and its public services are painfully strained so in this video we're going to take a look at Canada's economy and why things are getting [Music] worse before we start if you haven't already please consider subscribing and ringing the bell to stay in the loop and be notified when we release new videos so let's start by taking a look at the headline numbers like the rest of the world Canada's economy has had a tough few years Rising Global Food and energy prices pushed inflation up to a peak of 8. 1% in June 2022 a level last reached during the oil price crisis of the late '70s and early 80s however the Canadian economy seemed to recover pretty well after the Central Bank raised its Benchmark interest rate of 0. 25% in 2022 to a high of 5% in late 2023 inflation fell relatively quickly dropping to 3.
4% in May of 20123 and then stabilizing around 3% from January 2024 onwards this was higher than the bank of Canada's 2% Target but it was also low unstable enough that in June Canada's Central Bank decided to cut rates becoming the first G7 Central Bank to do so what makes this look even more impressive is that Canada apparently continued to post relatively strong GDP growth during this steep rise in interest rates at the same time as most of the global economy was stalled Canada posted GDP growth of 3. 8% in 2022 and 1. 1% in 2023 dates from April also suggest that in the first quarter of 2024 the Canadian economy grew by 1 .
7% year onye below analysts expectations of 2. 2% but well above basically every other G7 country apart from the US Canada's apparent over performance has drawn plaudits from International commentators in June the IMF praised Canada for achieving a so-called soft Landing I. E bringing inflation down without incurring a recession however things don't look quite as good when you dig into the data the main reason for this is that Canada's apparent growth has actually been driven by unprecedented amounts of immigration in the third quarter of 2023 alone Canada took in something like 400,000 immigrants including both permanent and temporary residents representing roughly 1% of the pre-existing population in perent terms this was the largest influx of people into Canada since the second quarter of 1957 when the country received tens of thousands of refugees fleeing from the 1956 Hungarian Revolution this is largely consequence of policy choices by the current government which has deliberately liberalized migration rules and set targets for roughly 500,000 new permanent residents each year this 1% increase was significantly larger than the growth that the Canadian economy experienced that quarter in fact it shrank by 0.
1% which means that GDP per capita actually fell this would be fine if it was a one-off thing but it's not according to a study by the Fraser Institute in five of the six quarters between the middle of 201 22 and the end of 2023 Canada's population grew by more than its economy well we don't have complete data for the first two quarters of 2024 the fact that growth has come in well below analyst's expectations suggests something similar happened then too this means that even though Canada's GDP is rising its GDP per capita is falling in other words the Canadian economy is in some sense getting bigger but Canadian Living standards are also actually falling in fact according to that Fraser Institute study I mentioned a moment ago GDP has declined from about $60,000 in the second quarter of 2022 when it peaked postco to about $58,000 in the fourth quarter of 2023 representing a decline of about 3. 4% this is pretty astonishing obviously we generally expect that GDP per capita should increase over time barring exceptional circumstances but this means that Canada's GDP per capita has now fallen to Bel below where it was in 2014 the seat Rising immigration has also made Canadians less positive about immigration pushed up Canada's unemployment to a 2-year high of 6. 4% and exacerbated its housing crisis which is one of the worst in the world the average house price in Canada has skyrocketed from roughly $250,000 Canadian dolls in 2005 to about $750,000 today and the ratio between median house price and median wage has risen from three in the '90s to nearly six today on top of that particularly popular cities like Vancouver and Toronto are literally some of the least affordable cities in the world with the ratio reaching 12 in Vancouver and nearly 10 in Toronto as we mentioned in other videos housing crises are generally bad for economies they exacerbate inequality push down fertility rates and even reduce productivity I.
E GDP or output per hour of work this is largely because High house prices deny even diligent people the opportunity to work in highly productive areas in Canada's case that cities like Calgary Toronto and Ottawa this might be one of the main reasons that Canada also has a productivity crisis on its hands at the moment in fact Canada has seen almost zero productivity growth since 2015 and real wages have actually fallen so if neither Canada's productivity nor its GDP per capita are actually growing significantly this means that Canada's GDP is only growing because because of immigration and because Canadians are working longer hours this is in part why in April the Trudeau government promised a wildly optimistic plan to build an extra 2 million units of housing by 2031 well short of the 3.
