Fewer Newcomers, Bigger Consequences: How Canada’s Reduced Immigration Will Impact GDP in 2025–2026

As of October 24, 2024, the federal government unveiled its 2025-2027 Immigration Level Plan (ILP); by reducing the share of temporary residents to 5% of the total population by the end of 2026. To make this plan work a series of measures have been announced over the course of the past year, including an intake cap on most study permits, eligibility changes to Post-Graduate Work Permits and to work permits issued to the spouses of international students and foreign workers under both the International Mobility Program (IMP) and Temporary Foreign Worker (TFW) Program.

To measure the impact of this immigration policy, two demographic scenarios were developed:

1. A status quo scenario in which immigration policy remains unchanged. It assumes that the admission of permanent resident residents would stay around 500,000 per year and that the non-permanent resident population would stabilize. Under these circumstances, the Canadian population would reach 42.8 million by the end of 2027.

2. A counterfactual scenario that assumes that the 2025-2027 ILP is achieved as presented. Under this plan, the Canadian population would return near current level (41.1 million) by the end of 2027.  

 After comparing these two scenarios, this new target for international migration translates to a 3.2 percent downward revision to Canada’s demographic outlook, equivalent to 1.4 million fewer residents by the end of 2027.

The Parliamentary Budget Officer (PBO) projected a 1.7% downward adjustment to the real GDP by 2027 under this plan.

Another analysis by the Conference Board of Canada estimates GDP will be $7.9 billion lower in 2025 and $16.2 billion lower in 2026, shaving off approximately 0.3 percentage points of growth annually.

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Even though the total size of Canada’s economy (GDP) is expected to grow more slowly because fewer people are coming into the country, the average income per person (real GDP per capita) is expected to go up by about 1.4% by 2027. WHY? Because with fewer people sharing the economy, the value of goods and services is divided among fewer people, making the average higher.

Also, Conference Board of Canada says that people are expected to spend a bit more (around 1%), thanks to higher wage and fewer workers available, which can give individuals more income and job opportunities but again higher wage can also mean increased cost for businesses, which might lead to more expensive products or services. Wage pressure and reduced supply could push inflation up (~+0.1%), prompting the Bank odd Canada to cut interest rates further to maintain economic stability.

Summary snapshot: 2025-2026 Economic Projections

Metric	2025	2026
Population change	-0.2%	–0.2%
Real GDP impact	–$7.9 billion (~–0.3 %)	–$16.2 billion (~–0.3 %)
Real GDP per capita	+~1%	+~1%
Labour hours (cumulative)	Reduced → fewer workers	Continued contraction
Wages	Rising, inflationary pressure	Continued upward trend
Policy outlook	Bank likely to cut interest rates	Continued support expected

Canada’s revised immigration plan represents a strategic pivot: slowing population growth to ease immediate strains on infrastructure and housing, while accepting a modest hit to overall GDP. However, the rising real per capita GDP suggests that average living standards may improve, at least in the short term.

For prospective immigrants and businesses, this means stiffer competition, with fewer spots available and potential wage gains in tight sectors. Admire Immigration recommends closely monitoring this landscape—navigating entry pathways early, and considering targeting economic streams aligned with labour needs (e.g., healthcare, skilled trades) to enhance chances.