🇨🇦 Canada’s Federal Budget Plans to Cut Temporary Residents, but Experts Warn of Economic Risks

The federal Liberal government, led by Mark Carney, reiterated its commitment in last week’s budget to reduce the number of temporary residents in the coming years. However, experts are warning that this move may come at the cost of Canada’s economic growth.

Temporary Residents Targeted for Reduction by 2027

According to the Toronto Star, the government aims to lower the share of temporary residents in Canada’s total population from about 7.5% at the end of 2024 to 5%, though the target date has been pushed back to 2027.

In 2026, Canada is expected to admit 385,000 temporary residents, including 230,000 temporary foreign workers. In comparison, the projected number of temporary workers in 2025 is approximately 368,000. Over the next two years, that number is expected to decline slightly to 370,000.

Economists Raise Concerns About Growth

Stephen Brown, Deputy Chief North America Economist at Capital Economics, noted that Canada’s current outflows of temporary workers and international students may not be sufficient to offset new arrivals. He emphasized:

“Truly reducing the number of temporary foreign workers will require strong political will.”

Brown warned that if the plan is implemented, Canada’s population growth could stagnate over the next two years. He added that a reduction in new workers, combined with ongoing productivity issues, could further drag down economic growth.

Other Policies May Offset the Impact

However, other parts of Carney’s budget may help soften the economic blow. For instance:

• Increasing the proportion of economic immigrants

• Accelerating foreign credential recognition

These measures could partially offset the impact of slower population growth.

International Student Caps to Be Halved by 2028

One of the most notable changes in the budget is the plan to cut the annual number of international student visas by about 50% by 2028.

Brown argued that limiting international students and temporary workers could help ease youth employment pressures. As of September, the unemployment rate among Canadians aged 15 to 24 had hit its highest point in 15 years before slightly declining in October. He noted:

“With fewer temporary workers, young Canadians should find it easier to land jobs.”

Rent Relief — But at What Cost?

RBC economist Rachel Battaglia added that reducing international student numbers could also ease rental pressure in major urban centers.

However, Brown warned that this may also discourage developers from building rental housing for students and newcomers, leading to reduced housing supply. He noted:

“Even though the government supports rental housing construction, slower population growth could reduce developer incentives.”

A Shift, But Not a Shake-Up

Battaglia described the Carney government’s new immigration plan as a moderate shift, noting it is far less dramatic than last year’s immigration overhaul. She also mentioned that one-time exemptions could allow some existing temporary workers and students to quickly obtain permanent residency, helping to offset population stagnation in the short term.

While reducing the number of temporary residents may serve short-term labor and housing policy goals, experts caution that such measures must be balanced carefully to avoid long-term economic consequences.