Montreal faces a “rocky ride” in 2024 as economic growth slows

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Economic growth in Montreal will decline for the third year in a row as immigration declines and housing construction remains sluggish, a new report says.

Montreal's projected growth rate for 2024 is 0.4 percent, the worst of the 13 major Canadian markets surveyed, the Conference Board of Canada said this week in its annual economic report on the city. This shows that real gross domestic product will increase by 6.7 percent in 2021, 3.4 percent in 2022 and about 0.9 percent last year.

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Real GDP in Canada is projected to grow by 0.7 percent in 2024, the Conference Board of Economists predict. The 12 other markets surveyed included Vancouver, Calgary, Regina, Winnipeg, Toronto and Halifax.

Quebec's plan to raise tuition fees and French language requirements for out-of-province students — along with a new federal cap on foreign student enrollment — could curb the flow of interprovincial and international migrants to Montreal in 2024, the Conference Board of Economists wrote. According to the report, Quebec's low immigration targets relative to other provinces mean Montreal employers rely more on non-permanent residents such as students to supplement their workforce.

Ottawa-based economist Jane McIntyre attributes Montreal's population growth directly to “increasing tuition fees for foreign students and stricter rules on French language proficiency, as well as national restrictions on foreign students.” The conference council said in an interview.

This year is “definitely going to be a bit of a rocky ride,” he added. “One thing that's unique about Montreal, and something that will take it up to 2024 and beyond, is the immigration picture. There are low levels of immigration, stricter provincial regulations, and now the federal government has imposed restrictions on foreign students. These things will weigh on Montreal in 2024 and beyond.”

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Montreal's annual population growth is expected to slow to 0.2 percent by 2028, after the Conference Board estimates it will reach about three percent in 2023. Population growth is expected to average 1.1% per year between 2024 and 2028, a much slower rate than Toronto and Vancouver.

These relatively weak increases are hampering Montreal's economic growth, the Conference Board said. Real GDP is growing at about 2.2 percent per year from 2025 to 2028, which is lower than the national average.

Montreal will attract a record 150,000 international newcomers in 2023, the Conference Board said. Most of them were temporary residents, a group that included international students, temporary foreign workers and refugees.

According to the Conference Board, net international migration to the city is expected to fall to 92,000 in 2024 and decline in subsequent years.

“People like us have been surprised at how high international migration has been in the last couple of years,” McIntyre said. “Even 92,000 is relatively high, but it's a big pullback from what we've seen.”

Higher interest rates, a direct result of higher inflation, are affecting consumer and business confidence as well as spending across Canada. Business investment will remain “subdued” in 2024, affecting manufacturing sector growth, the Conference Board says.

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Housing starts, which will shrink by about a third in 2023, will remain at depressed levels due to persistent labor shortages.

“One of the challenges in the construction industry is an aging population that creates a labor shortage,” McIntyre said. “This is not an overnight problem.”

Despite the slowdown in residential construction, several large non-residential infrastructure projects should support construction activity for some time. These include the Blue Line subway extension, renovations to the Louis-Hippolyte-La Fontaine tunnel and the $7 billion Royalmount megamall.

Total employment in the city is expected to decline in 2024 as labor demand declines and layoffs continue. Online jobs for Montreal, as tracked by the Conference Board's Canada Hiring Index, fell by more than 30 percent last year.

Unemployment is rising in Montreal. According to official data released on Friday, the city's unemployment rate averaged 7.3 percent in the three-month period ending in January. This is 6.2 percent higher than last year's average.

Job growth this year is likely to be concentrated in health care and social services, the Conference Board report said. Retail trade and manufacturing may shrink.

If the Bank of Canada starts cutting interest rates later this year as expected, conditions in the labor market should gradually improve. Over the period 2024-28, economists at the Conference Board project that labor force growth in Montreal will average 0.6 per cent, below the national average of 1.4 per cent.

As for inflation starting to fall, “we should be getting somewhere close to the central bank's two percent target in late 2024 or early 2025,” McIntyre said. “We expect it to go down this year as well.”

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