Demographic shift may be hampering Canada’s growth

Bank of Canada governor Stephen Poloz believes that demographic forces and the aftermath of the global financial crisis are limiting economic growth, reports CentralBanking.com.

“A period of subdued growth after a financial crisis can still be regarded as cyclical,” Poloz said in a speech delivered to the Halifax Chamber of Commerce yesterday. “But the global economy may not be just suffering through a hangover from the financial crisis. There are other, longer-term forces at work as well.”

In his address, Poloz described these factors as separate but capable of functioning together. He noted that weak global demand is limiting the growth of Canadian exports and business investment in structures, equipment and software.

Additionally, Canada’s demographic profile means labour’s contribution to potential growth will diminish as baby boomers retire and more people begin to save for retirement with their RRSPs.

“When a large swath of the population is making similar decisions, the impact on the broader economy can be significant,” Poloz said, adding that retirement savings could be “put to work” through the use of infrastructure investments. Despite that, they can also cause bubble situations in real estate and financial markets.

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