Bank of Canada says aging population, low immigration ‘reshaping’ economy

Canada's rapidly aging population and reduced immigration levels are significantly impacting the nation's economy, according to new analysis from the Bank of Canada. The country's population growth, which reached three percent annually in the first half of this decade compared to the previous 1.2 percent, has added workers and helped alleviate labor shortages.

However, this growth has also increased pressure on housing and social services. In 2025, the country's population growth rate slowed to 0.5 percent, the slowest in over a century, following the federal government's decision to lower immigration levels in 2024. With fewer newcomers, Canada's workforce will shrink, affecting the size of purchases and overall economic output.

The housing sector typically lags behind population growth, so fewer immigrants will likely lead to lower housing demand and potentially lower housing costs. Yet, a decline in immigration will also result in reduced demand for other goods and services, likely slowing economic growth. As Canada ages, the median age has risen from 26 in 1971 to over 40 in 2026.

This shift will lead to changes in the goods and services produced and consumed. With the baby boomer generation reaching retirement, there will be more demand for travel services, pharmaceuticals, and home care, which could also impact government spending and taxation. Fewer young workers will replace retiring employees, potentially causing labor shortages, wage increases, and inflation.