Showing posts with label Economic growth. Show all posts

After Strong Baby Boom, a "Baby Bust"?

Canada Facing Up to Economic Challenges of Ageing Population, Schroders Study Says, - Demographic changes to impact economic growth, - Strong resource base and "supercycle" trend will provide cushion, - Net present value of ageing population 35 times high

By Schroder Investment Management North America Inc.

Published: Thursday, Jul. 21, 2011 - 9:10 am

LONDON and NEW YORK, July 21, 2011 -- /PRNewswire/ -- Canada's unique demographics and rapidly ageing population will create challenges for future GDP growth if left unchecked. The country is already taking important steps to tackle its ageing population, but there is more to be done, argues a new research report by Schroders, the global investment management company.

In the report, co-authors Virginie Maisonneuve, Head of Global Equities at Schroders, and Katherine Davidson, examine how the larger-than-usual baby boom in Canada and significant immigration in the 50s and 60s has resulted in a unique demographic profile.

Canada has been quick to recognise its impending demographic transition and adjust its institutions accordingly. The only ways to break the relationship between reduced labour supply as baby boomers retire and lower GDP growth is "to increase immigration or raise participation rates, especially of older workers," quotes Virginie, and Canada is doing just that.

However, this will not be enough to meet the growth challenge. Future growth will have to be driven by improvements in labour productivity. Furthermore, Canada is expected to face the highest age-related spending of any OECD member state(2): "The challenge for Canada today is to manage the costs of a rapidly ageing population without compromising its superior health status and further worsening standards of service" the paper states.

With a strong record in controlling costs, Canada is well-placed to meet this challenge. For example, it spends 10% of GDP on health care versus the US at 16%(3). There is also a lower reliance on the state for pension provision with private pensions and other investments providing over 40% of retirement income, compared to the OECD average of 20%(4).

Other interesting findings:

By the 2020s, all population growth is expected to come from immigration and many sectors of the economy will be dependent on foreign workers. It is unlikely that immigration could be raised to high enough levels to fully offset the effect of domestic population ageing(5).
While the healthcare and financial sectors should increase their share of GDP, other sectors – education, manufacturing, construction and retail – will decrease in importance(6).
Early recognition and steps to address the demographic issue result in a pension plan that is expected to be perfectly solvent by 2050 – a marked contrast with US Social Security, which is expected to face a permanent shortfall by 2016 and be completely exhausted by 2039(7).
Canada is well-placed to address its demographic challenge with one of the strongest fiscal positions in the OECD, a well-developed private pensions sector and a strong record for controlling healthcare spending(8).

Virginie Maisonneuve, Head of Global & International Equities at Schroders:

"Demographic analysis is part of a coherent macroeconomic and thematic road map that serves as a framework to our stock analysis and selection. Many of our current holdings listed in Canada are resource companies. They will need to adapt to the demographic challenges that we have highlighted in this report in order to ensure success and shareholder value.

Canada's immigration levels won't jump drastically, Kenney says

BY ALTHIA RAJ, POSTMEDIA NEWS JULY 19, 2011

Canada's Immigration Minister Jason Kenney listens to a question while speaking to journalists in the foyer of the House of Commons on Parliament Hill in Ottawa March 7, 2011. Canada needs more immigrants to sustain its economic growth but the Conservative government won't significantly increase immigration levels because Canadians don't want too many newcomers and the federal government can't afford to integrate them either, Citizenship and Immigration Minister Jason Kenney says.

Photograph by: Chris Wattie, Reuters

Canada needs more immigrants to sustain its economic growth but the Conservative government won't significantly increase immigration levels because Canadians don't want too many newcomers and the federal government can't afford to integrate them either, Citizenship and Immigration Minister Jason Kenney says.

Canada faces a labour shortage and needs immigrants to offset the balance of an aging population, Kenney is expected to tell the Vancouver Board of Trade Tuesday.

"Several studies have concluded that we would have to quadruple immigration levels from 250,000 to more than one million annually in order to maintain the (working) age ratio in the Canadian population. But that's not going to happen," he is to say, according to his speaking notes.

"We do not have the resources or ability to integrate a million new immigrants every year. We can't teach them English or French. We can't flood our taxpayer-funded services like health care and public education. We don't put such high pressure on housing and real estate markets," Kenney explains.

"We must also be very careful not to jeopardize the generally very positive and welcoming attitude toward immigration and immigrants that Canada enjoys," he later adds.

Only 30 per cent of Canadian immigrants are economic migrants, people selected on the basis of their necessary skills or arranged employment offer, Kenney notes. Another 30 per cent are the spouses or dependents of these individuals and 26 per cent are immigrants from family class while 14 per cent are refugees.

"People want to come to Canada because we are a model for the world. We can't, however, take all who want to come. There is a limit," Kenney says.

The Citizenship and Immigration Department is currently consulting with Canadians about amount and the types of people it should accept into the country.

Faced with a backlog of more than a million people in the immigration queue, Kenney says he has issued ministerial instructions to put applicants with experience in key occupations and those with job offers from Canadian employers in front of the line.

"We have enough parents and grandparent applicants for seven years, and this problem is getting worse," the minister says.

Kenney is also expected to announce that the federal government will increase the number of provincial nominees — immigrants that provinces themselves select based on their own economic needs — from approximately 36,000 to 40,000.

araj@postmedia.com

Twitter.com/althiaraj

IMF boosts outlook for Canada

Image via Wikipedia

The International Monetary Fund boosted its expectations for Canadian economic growth this year as it warned the world is facing new threats from surging oil prices, Mideast turmoil, higher inflation in China and Europe's debt woes.

Topics :: IMF , World Bank , The Associated Press ,United States , Canada , China

In a new economic forecast Monday, the organization raised its projection for Canadian growth of 2.8 per cent for 2011, up from an earlier forecast for 2.3 per cent.

The Canadian economy grew 3.1 per cent in 2010.

"Economic developments in Canada last year mirrored those in the United States, with the pace of economic activity moderating in midyear," the report said.

"The deceleration reflected not only the drag on Canadian exports from weak U.S. activity and strong import growth from investment spending amid an appreciating currency, but also a cooling of some domestic activity."

The IMF also lowered its expectations for Canada for 2012 to 2.6 per cent compared with 2.7 per cent in an earlier forecast. The report suggested the risks in Canada for 2011 are tilted to the downside.

"The main domestic risk being deterioration of housing markets and household balance sheets," the IMF said.

"Key external risks are lower-than-expected activity in the United States and renewed sovereign strains in Europe."

The IMF said the global economy should grow 4.4 per cent this year. That compares with global growth of five per cent last year. The IMF projects industrial countries will grow 2.4 per cent while developing countries, a group that includes China, will grow more than twice as fast at 6.5 per cent.

"The world economic recovery is gaining strength, but it is unbalanced," Olivier Blanchard, the IMF's chief economist, told reporters.

He said it would be critical for countries running large government deficits such as the United States to make progress in getting those deficits under control. At the same time, countries with large trade surpluses, such as China, will need to do more to boost domestic demand and not rely so heavily on exports to generate economic growth.

The IMF's new growth forecast was prepared for spring meetings of the 185-nation IMF and its sister lending agency, the World Bank.

Before those discussions Saturday, finance ministers and central bank presidents of the Group of 20 major industrial and developing nations will hold closed-door talks on Friday.

The finance officials will try to assess how big a threat the rise in energy and food prices will be and also what they can do collectively in response to the political turmoil in the Middle East and North Africa.

The United States is expected to keep pressing China to move more quickly to allow its currency to rise in value against the dollar as a way of making U.S. goods more competitive in China.

China, the largest foreign holder of U.S. government debt, will be seeking assurances that Washington is moving to put in place a credible plan to deal with soaring federal budget deficits.

At their last meeting in Paris in February, the G20 officials struck a watered-down deal on a group of technical indicators to track global imbalances. But the G20 left the tricky question of what to do if the balances become dangerous for later discussions.

The IMF, in its new ``World Economic Outlook,'' left unchanged its January projection that the global economy will grow 4.4 per cent this year and 4.5 per cent in 2012.

In 2009, the global economy shrank by 0.5 per cent, its worst downturn since the Second World War, with growth rebounding in 2010 to 5 per cent.

The 2.4 per cent growth forecast for the advanced economies was down 0.1 percentage point from January. The IMF expects these countries to grow 2.6 per cent in 2012.

"New downside risks are building on account of commodity prices, notably oil, and relatedly, geopolitical uncertainty as well as overheating and booming asset markets in emerging market economies," the IMF said.

Growth in the United States was forecast to be 2.8 per cent, down 0.2 percentage point from January, reflecting primarily the drag from higher oil prices. The IMF's forecast is in line with private economists.

Japan, which was hit by a devastating earthquake and tsunami on March 11, was forecast to grow 1.4 per cent this year, down 0.2 percentage point from the January forecast. The expectation is that the world's third largest economy will be slowed at first by the natural disasters but then receive a boost from the reconstruction efforts.

China, now the world's second largest economy, was projected to grow 9.6 per cent this year, a forecast that was unchanged from January. Beijing is raising interest rates to deal with rising inflation risks.

All emerging market economies, a group that includes China, India and Brazil, are expected to grow 6.5 per cent this year and next year.

Developing countries are doing better because they emerged from the recession in much better shape than many industrial countries.

"Economies that are running behind the global recovery typically suffered large financial shocks during the crisis, often related to housing booms and high external indebtedness," the IMF said.

Economic growth in the 17 countries that use the euro including Germany, France and Italy was projected to be 1.6 per cent this year and 1.8 per cent next year, an anemic recovery that reflects continued worries that debt problems in Greece, Ireland and Portugal will spread to other countries.

– With files from The Associated Press

Canada could lead developed world in growth: RBC head

The Royal Bank Plaza building in Toronto, Ontario

Image via WikipediaMONTREAL — Canada could enjoy a "breakaway decade" of economic growth if businesses invest more to improve productivity, the head of the Royal Bank of Canada said Monday. Gordon Nixon told a Canadian Club audience in Montreal that Canada has the potential to significantly outperform the developed world in terms of economic growth and social leadership.
"Our economy has been resilient, the housing market is up, past federal surpluses have provided flexibility, the banking system is stable and corporate tax rates are low," he said.
But Nixon said the country's promise can only be realized by tackling several key shortcomings.
They include reducing provincial and federal deficits, increasing immigration and tackling Canada's Achilles heel of low productivity.
In particular, he challenged businesses to spend more on innovation, noting that over the last 30 years the productivity gap between Canada and the United States has more than tripled.
"Innovation-fuelled productivity is the lever we can pull to increase the economic pie we all share and, in doing so, improve our standard of living and gain competitive clout in the global marketplace."
Governments have helped by cutting regulatory and tax burdens, but Nixon says they must now work aggressively to balance their budgets.
Meanwhile, Canada should gain a competitive advantage as other countries are forced to boost taxes and cut spending.
"Canada today is an attractive place to live, work and build successful businesses. And, with continued fiscal responsibility, we should be able to avoid the current plight of many countries that will be forced to undergo painful restructurings to address their systemic failures," he said.
"It's our turn as business leaders to say thanks to the government for the tax reform and now we are going to use it to invest and (make) innovation part of our agenda."
Meanwhile, he said Canadian governments at both the federal and provincial levels must continue to put their financial houses in order after the recent recession.
"We cannot let the advantage gained through 15 years of fiscal responsibility slip away," he said.
"Notwithstanding the political challenges of fiscal restraint, it is essential that the provinces and the federal governments aggressively work their way back to fiscal balance."

Sask., Man., lead population growth

Pie chart of the area of provinces and territo...

Image via Wikipedia

Immigration in 2010 highest since '50s

Saskatchewan and Manitoba emerged as the country's growth leaders in population numbers released by Statistics Canada Thursday.
The agency estimated that Canada's population grew by 1.1 per cent in 2010 to total 34,278,400 as of January 1, 2011.

Population, as of January 1. 2011
Newfoundland and Labrador	509,100
Prince Edward Island	143,500
Nova Scotia	943,400
New Brunswick	753,200
Quebec	7,943,000
Ontario	13,282,400
Manitoba	1,243,700
Saskatchewan	1,052,100
Alberta	3,742,800
British Columbia	4,554,100
Yukon	34,300
Northwest Territories	43,600
Nunavut	33,300
Canada	34,278,400
(Source: Statistics Canada)

But Saskatchewan's rose by 1.5 per cent and Manitoba's increased 1.4 per cent, helped by strong economic growth prospects.
Movement from other provinces helped Saskatchewan while immigration was a strong factor in Manitoba's growth.
The growth of 40,400 from October 1, 2010 was lower than in the same period in 2009, when the number of Canadians grew by 55,900.
While growth due to natural increase was relatively stable, net international migration declined from 25,400 to 10,900.
"This decline in net international migration can be explained by a larger decrease in non-permanent residents living in Canada," it said.
Canada received more than 280,000 immigrants in 2010, the highest level recorded since the 1950's. This was 28,500 more immigrants than in 2009

(Note:CBC does not endorse and is not responsible for the content of external links.)

There Is No Wealth but From Men: Why Immigration Is Good for the Economy

Thousands gather in favor of immigrants rights...

Image via Wikipedia

2010 has been rife with anti-immigrant rhetoric and action on both sides of the Atlantic. There were the atrocious anti-migrant riots in Italy and the passing of controversial Arizona law SB 1070. France has taken a demagogic turn, which some commentators dub xenophobic. Even Canada, which is celebrated for its progressive immigration policies, has experienced unprecedented immigrant-bashing rhetoric around the arrival of a boat carrying Sri Lankan self-proclaimed refugees.
There is an emerging conventional wisdom across the Atlantic that increasingly characterizes immigrants as a prime source of the ills of our societies. But do economic studies back this up? In short, no.
Immigration has an undisputed effect on economic growth. Migration reduces imbalance in the labor market without imposing a significant impact on public finances. Indeed, without immigration, the population of several European countries, particularly Germany, Spain and Italy, would have declined long ago. In Canada, over 70% of the growth in the labor force during the 1990's is attributable to immigration, a figure that could someday reach 100%. Given the overrepresentation of young people among immigrants, immigration also brings down the age of the population, relieving pressure on the pensions systems. Moreover, migrants help grow a host country's market access by creating valuable business networks with their countries of origin. The benefits continue. In most member countries of the Organization for Economic Co-Operation and Development (OECD), the proportion of immigrants with university degrees is greater than that recorded for the native population. A recent study demonstrates that immigration fuels innovation, an economic boon. From a historical point of view, the example of the great transatlantic migration, from Europe to the Americas of the late nineteenth and early twentieth century has amply demonstrated the salutary effect of immigration on growth.
Conventional wisdom is also wrong in linking immigration and native unemployment. The notion that immigrants cause natives to lose their jobs is simply not supported by empirical results. There is not a fixed number of jobs in an economy, and immigrants often do not compete directly with native workers in the labor market.
Migrants are first and foremost consumers who help expand the economy even before stimulating the labor supply. Their demand stimulates the supply of goods and services which in turn lead to job creation. Except in very special cases, immigrant inflows are extremely low compared to the workforce already available in a country. As such, the absorption of newly arrived migrant on the labor market generally proves to be relatively easy. In fact, when the economy is in a recession, migrants are the first to lose their jobs.
Most studies in fact demonstrate the existence of a positive relationship between immigrant and native labor forces. In fact, people coming from earlier waves of migrants are most directly in competition with newly arrived immigrants rather than the natives. In time of expansion, workers tend to raise their expectations and to shy away from activities that are most painful and least valued, thus generating the need for the recruitment of low-skilled immigrants. Consequently, the idea that immigrants take the jobs of the natives seems to be simply xenophobic political posturing.
Regarding the impact of immigration on wages, a recent meta-analysis of the available data concluded that the impact of immigration on the earnings of the native born population is statistically insignificant. Migrants are not responsible for alleged decrease of salaries or social dumping. Migrants are convenient scapegoats.
In countries with limited sectoral and geographical mobility, foreign labor can alleviate the shortages. The foreign workforce, being more mobile than the native one -- since migrants have relatively less material and family ties in their host country -- helps diffuse tensions in the labor market and helps reinvigorate certain regions. Some shortages are already apparent on the labor markets of most OECD countries, particularly for specialties related to new technologies and health.

Immigration has no significant impact on public spending. Indeed, the great majority of immigrants do pay taxes and add public revenue, particularly high-skilled immigrants. The consequences are positive for some public services, such as defense and interest on the national debt, for which immigrants do not impose costs. The bolstering effect of immigration on the U.S Social Security's finances is particularly compelling.
Economic data provide us with two certainties. First, immigration has positive effects on the overall prosperity of a nation. Second, with the ailing economy, migrants are used as scapegoats by uninspired politicians to scare up votes. Indeed, isn't the United States, a country completely made up of immigrants, the boldest example of the benefits of immigration for a nation?

Follow Rabah Ghezali on Twitter: www.twitter.com/RabahGhezali

Immigration Canada

After Strong Baby Boom, a "Baby Bust"?

Canada's immigration levels won't jump drastically, Kenney says

Photograph by: Chris Wattie, Reuters

IMF boosts outlook for Canada

Canada could lead developed world in growth: RBC head

Sask., Man., lead population growth

Immigration in 2010 highest since '50s

There Is No Wealth but From Men: Why Immigration Is Good for the Economy

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