Canada is experiencing its longest and deepest decline in standard of living since 1985, with significant drops in real GDP per person since 2019.
A new economic study suggests that Canada may be experiencing its longest and most significant decline in real gross domestic product (GDP) per person in nearly four decades. The research, published by the Fraser Institute, indicates that measuring Canada's economic health on a per capita basis paints a much grimmer picture than looking at aggregate GDP growth alone.
Between 2000 and 2023, while Canada had the second-highest rate of aggregate GDP growth in the G7, its growth rate per person was one of the lowest. The study by Grady Munro, Jason Clemens, and Milagros Palacios identifies three major downturns in Canada's real GDP per person since 1985: the early 1990s recession, the 2008 financial crisis, and the current period starting in 2019.
As of the end of 2023, the real GDP per person has fallen by 3 percent from $59,905 to $58,111 when adjusted for inflation. This slump has persisted for 18 quarters, with the only longer period being the 21-quarter decline from 1989 to 1994.
"This lack of meaningful recovery suggests that since mid-2019, Canada has experienced one of the longest and deepest declines in real GDP per person since 1985," the authors of the study remarked. The continued downward trajectory, with a 0.8 percent decrease in the fourth quarter of 2023 from the previous quarter, raises concerns that the decline may not have bottomed out yet.
The Fraser Institute's findings are echoed by other economists. Ruchir Sharma of Rockefeller International pointed out in the Financial Times that Canada has seen a steep fall in per-capita income growth and a diminished share of global GDP, terming it a "breakdown nation."
The economic situation in Canadian provinces is also troubling when compared to U.S. states. According to Trevor Tombe, a professor of economics at the University of Calgary, provinces like Ontario, Quebec, and the Maritimes are lagging significantly behind in terms of economic output per person.
As the country grapples with these economic challenges, the Fraser Institute warns that if GDP per person does not improve in 2024, the current period could become the longest and most severe decline in the last four decades. The implications of such a trend could have lasting effects on the standard of living in Canada.
