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Students and pedestrians walk along Gould Street on the Toronto Metropolitan University campus on Jan 22.Fred Lum/The Globe and Mail

The Canadian population increased by nearly 1.3 million in 2023, Statistics Canada reported Wednesday. The expansion was fuelled largely by the arrival of temporary residents, a group whose size the federal government is now trying to restrict as the country faces a protracted housing crisis.

Temporary residents include international students, asylum seekers and people in Canada on work permits. Last year, their ranks grew by slightly more than 800,000, according to the new Statscan figures. This was the second consecutive year that temporary immigration accounted for the bulk of population growth.

As of Jan. 1, Canada was home to 2.67 million temporary residents, a near doubling in just two years. They now make up 6.5 per cent of the country’s population.

In total, the population grew by 3.2 per cent in 2023, to 40.8 million, the fastest pace of growth since 1957.

The Statscan numbers underscore the challenge ahead for Ottawa as it tries to curb the pace of migration. Last week, the federal government announced it would reduce the share of temporary residents to 5 per cent of the population over the next three years, a plan it said will be finalized by the fall. And earlier this year, the government announced a two-year cap on the volume of study visas it approves.

The moves followed widespread criticism of the government’s approach to immigration. Several economists at Canadian banks have accused Ottawa of losing control of the immigration system, a turn of events they say has led to a spike in demand for things already in short supply, such as affordable housing and access to health services.

“We’re stressed in all directions,” Bank of Montreal senior economist Robert Kavcic said. “The supply side can’t possibly respond fast enough.”

Nearly 472,000 newcomers became permanent residents of Canada last year. The federal government is ramping up the intake of permanent residents to 500,000 in 2025.

While the government sets annual targets for permanent resident admissions, it has not previously done so for temporary residents. Last week’s announcement was a break with that practice. At the time, Immigration Minister Marc Miller said the volume of temporary residents could decline by roughly 20 per cent over the coming three years, though that percentage was based on the 2.5 million total Statscan reported late last year.

Canada’s population shock drives most of recent productivity declines

Statscan said in Wednesday’s report that without temporary migration – which is to say, counting only permanent immigration and natural change (births minus deaths) – the population would have increased by only 1.2 per cent.

Many economists have loosely projected that, because of the new limits on temporary resident admissions, population growth could slow to around 1 per cent in coming years, which would be more in line with historical averages.

Canada relies almost exclusively on international migration to fuel its population growth. New temporary and permanent residents accounted for 98 per cent of the overall population increase in 2023.

Stronger immigration has been a guiding principle of the federal government under the Liberal Party, which has argued that immigrants are sorely needed to counter the effects of an aging society, and to fill job vacancies that have frustrated the corporate sector.

The recent spike in newcomers has propped up Canada’s economic numbers. Real gross domestic product rose by 1.1 per cent in 2023. But, after accounting for strong population growth, economic output has declined on a per-person basis.

The coming cap on temporary residents is likely to have wide-ranging effects on the economy, analysts have said. Mr. Kavcic said rental housing would be among the first markets affected.

Randall Bartlett, senior director of Canadian economics at Desjardins Securities, said there will be trade-offs from the recent announcement. He suspects that slower population growth will cool demand for housing and help to reduce inflation. Mr. Bartlett said he also expects that economic output for the average worker will rise, because certain low-productivity sectors – such as hospitality – will have less access to foreign labour.

“We think that there will be a bit of a boost to productivity in Canada as that opportunity to use temporary labour to meet demand is not as available as it has been,” he said.

On the flip side, if slower population growth results in nominal gross domestic product growing more slowly than expected, there could be negative effects on government finances. “That ultimately leads to weaker revenue growth, and ultimately larger deficits on the part of governments,” Mr. Bartlett said.

The Statscan report also said that migration between provinces remained at the highest levels observed in the past three decades. Roughly 330,000 Canadians moved from one province or territory to another last year.

Alberta saw a net interprovincial increase of around 55,000 last year, the highest among the provinces and territories. This was also the largest interprovincial gain in records dating to 1972.

Ontario, meanwhile, had a net loss of roughly 36,000 people to other provinces and territories last year, similar to the outflow in 2022.

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