Ontario’s surging population growth is being driven by an increase in non-permanent residents that might not last, putting the province’s economic growth on potentially shaky ground, according to a new report from Desjardins Economics.

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A plausible scenario in which a net decline in non-permanent residents develops in the coming years could lead to a drag of up to 0.5 percentage points on economic growth by mid‑decade, Desjardins’ modelling suggests.

“That is a meaningful impact with Canadian growth expected to slow to a rate near zero as we progress through 2024,” wrote Marc Desormeaux, principal economist at Desjardins, in the June 29 report.

The report follows the release of Statistics Canada’s Q1 2023 population data, which showed a 504,600 or 3.4 per cent growth in the 12 months to Q2 2023 in Ontario’s population due to immigrant landings and net non‑permanent resident admissions.

These “explosive gains” mark the fastest year‑over‑year pace since the 1970s.

“The steep pickup in Canada’s population growth … carries with it many implications for the national economy,” Desormeaux said. He added that the recent surge in Ontario’s population is “striking” and should contribute to near‑term economic growth, but there are longer‑run questions and challenges.

While the gap appears to have narrowed more recently, non‑permanent residents, like new immigrants, have not traditionally fared as well in the labour market as Canadian‑born workers, Desormeaux said.

The continued surge and contribution from non‑permanent residents comes against a backdrop of record net migration away from the province, especially among young people, in large part due a sustained erosion in affordability, Desormeaux said.

With non‑permanent residents playing a greater role in driving headcount gains than they have historically, Ontario must focus on improving housing affordability, while policymakers need more data on temporary workers in Canada, he said.

“Our analysis suggests that, on its own, migration to other provinces in response to limited housing affordability may not severely weigh down economic activity in the near term,” the report said. “However, continuation of this trend will almost certainly limit Ontario’s ability to harness the economic power of its young people over time. Moreover, if international migration is to remain a key source of population growth, newcomers will need an affordable place to call home if they are to contribute to their full potential. And Ontario will require infrastructure that meets the needs of its growing population.”

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