Battered Economy Running Below Potential: Canada’s Potential Output Outlook to 2040

This annual economic forecast presents Canada’s long-term potential output outlook.

Documents Highlights

• Potential output is forecast to expand at an average annual pace of 1.5 per cent between 2020 and 2040.
• Slower growth in the labour force and a gradual decline in the natural rate of unemployment will shape potential employment over the long term.
• Machinery and equipment investment will expand at a steady pace throughout much of the long term, helping to keep total capital stock elevated over the forecast.
• As the workforce shrinks over the course of the forecast, businesses will be encouraged to invest in productivity-enhancing technology to boost total factor productivity growth.
• With real output expected to outpace potential output over the next several years, the output gap is expected to close sometime around 2028.