Impact assessment of 2025-2027 Immigration Level Plan

Summary

On October 24, the Government released its 2025-2027 Immigration Levels Plan (ILP),[^1] which included permanent resident targets and, for the first time, temporary resident targets for international students and temporary foreign workers.

For permanent residents, the plan highlights a decrease in admissions from 464,265 in 2024 to 395,000 in 2025, 380,000 in 2026, and 365,000 in 2027. For non-permanent residents (NPRs), the plan sets arrival targets with the goal of reducing the number of NPRs to 5 per cent of Canada’s population by the end of 2026.

These new targets for international migration translate to a 3.2 per cent downward revision to Canada’s demographic outlook, equivalent to 1.4 million fewer residents by the end of 2027.

Overall, we estimate the 2025-2027 ILP would result in 1.3 billion fewer hours worked in 2027 with 93 per cent of this reduction being attributable to the demographic shock.  This, in turn, would result in a 1.7 per cent downward revision to real Gross domestic product (GDP) by 2027. However, given the sizeable population shock, real GDP per capita would be 1.4 per cent higher in 2027 under the 2025-2027 ILP.

Overall, we estimate that the new immigration targets would reduce nominal GDP—the broadest measure of the government tax base—by 37 billion on average over the next three years.

Background

On October 24, the Government released its 2025-2027 Immigration Levels Plan (ILP), which included permanent resident targets and, for the first time, temporary resident targets for international students and temporary foreign workers.

For permanent residents, the plan highlights a decrease in admissions from 464,265 in 2024 to 395,000 in 2025, 380,000 in 2026, and 365,000 in 2027. For non-permanent residents (NPRs), the plan sets arrival targets with the goal of reducing the number of NPRs to 5 per cent of Canada’s population by the end of 2026.

To measure the impact of this new immigration policy, two demographic scenarios were developed:

• A status quo scenario in which immigration policy remained unchanged. It assumes that the admission of permanent residents would stay at around 500,000 per year and that the non-permanent resident population would stabilize. Under these circumstances, the Canadian population would reach 42.8 million by the end of 2027.

• A counterfactual scenario that assumes that the 2025–2027 ILP is achieved as presented. Under this plan, the Canadian population would return near current levels (41.4 million) by the end of 2027.

Comparing the two scenarios (Figure 1) highlights that the new immigration policies translate to a 3.2 per cent downward revision to Canada’s demographic outlook, equivalent to 1.4 million fewer residents by the end of 2027.

In this report, PBO uses these demographic scenarios to estimate the economic impacts of the new immigration policies presented in the Government’s 2025–2027 ILP.[^2]

Office of the Parliamentary Budget Officer

Statistics Canada

Office of the Parliamentary Budget Officer

Statistics Canada

Economic Impact Assessment

Under the two scenarios, the projected Canadian populations differ in size, but also in composition. Considering that, on average, immigrants and non-permanent residents are younger, under the ILP 2025–2027 scenario, the large reduction in international migration results in a comparably older total population.

Given that young people are more likely to participate in the labour market, the difference in the age distribution heightens the reduction of the labour supply. Overall, we estimate the 2025–2027 ILP would result in 1.3 billion fewer hours worked in 2027 with 93 per cent of this reduction being attributable to the demographic shock.

Office of the Parliamentary Budget Officer

Office of the Parliamentary Budget Officer

Under the 2025–2027 ILP scenario, the reduced labour supply raises wages by 0.6 per cent on average between 2025 and 2027. However, over the same period, the smaller population reduces total household consumption by 2.0 per cent on average.

We estimate that new immigration policies presented in the 2025–2027 ILP would result in a 1.7 per cent downward revision to real GDP by 2027 (Table 1). However, given the sizable population shock, this translates to a 1.4 per cent upward revision to real GDP per capita.

Given an assumed net reduction in excess supply, the 2025–2027 ILP would raise GDP inflation by an average of 0.1 per cent over 2025–2027.

Overall, we estimate that the new immigration targets would reduce nominal GDP—the broadest measure of the government tax base—by 37 billion on average between 2025 and 2027.

The estimates presented in this analysis are directly tied to population projections presented in the Government’s 2025–2027 ILP. We judge that there is significant risk to this demographic outlook, as such, the economic impacts of the new immigration policies reported above are uncertain.