Former Bank of Canada governor Stephen Poloz has declared that Canada is in a recession, attributing the country’s economic resilience to strong population growth rather than genuine economic strength. Speaking during a webinar, Poloz, now a special adviser at Osler, Hoskin & Harcourt LLP, dismissed the conventional definition of a recession, which requires two consecutive quarters of negative growth, as inadequate in describing the current economic climate.
Poloz explained that the influx of new immigrants, who contribute to consumer spending on essentials, has artificially boosted consumption figures, masking underlying economic weakness. Statistics Canada recently reported that GDP per capita had declined for the sixth consecutive quarter, with a 0.4% drop in the third quarter. While overall economic growth reached 2.1% in the second quarter, it slowed to 1% in the third quarter, signaling broader economic struggles.
The cost of living has surged by 30% for Canadian consumers in the wake of inflation, further straining household budgets and reducing discretionary spending. Poloz noted that inflation has been declining faster than anticipated, a trend he argues is indicative of a recession. Adding to economic uncertainty is U.S. President-elect Donald Trump’s proposed 25% tariff on Canadian imports, which could significantly impact Canada’s GDP. A Canadian Chamber of Commerce report predicts such tariffs could shrink Canada’s GDP by 2.6% and the U.S. economy by 1.6%.
The potential tariffs also pose a dilemma for central banks, which could be forced to keep interest rates elevated despite slowing economic growth. Poloz warned that this scenario could lead to stagflation, a dangerous combination of stagnating growth and rising inflation.
Addressing recent government measures, Poloz expressed skepticism about the long-term impact of Ottawa’s temporary goods and services tax (GST) holiday. While such policies may provide short-term relief to Canadians, Poloz argued they fail to address structural economic challenges. Instead, he called for sustainable strategies that foster Set featured imagelong-term economic growth, likening the GST holiday to “giving somebody a fish instead of giving them a fishing rod.”
With the Canadian economy grappling with inflation, tariffs, and declining per capita GDP, Poloz’s remarks underscore the challenges ahead for policymakers as they seek to balance growth and stability in an uncertain global landscape.
