BoD OFFSITE | TORONTO REGION BOARD OF TRADE
Economic forecasts are a valuable exercise. A mix of science and art, they provide a forward-looking assessment of where the economy is headed, the factors driving these trends, and the risks impacting our economic trajectory.
As the Board enters a new pivotal fiscal year, it’s important to take stock of the broader economic landscape and explore the pressures shaping business decisions and liveability across the region.
Coming out of a period of rapid inflation, followed by the fastest rate of monetary policy tightening (interest rate hikes) in modern history, most commentators expected the global economy to be in a recession by now. A high probability was ascribed to a ‘hard landing’ – meaning a rapid decline in economic activity and rising unemployment. Export Development Canada’s (EDC) most recent outlook illustrates a picture where inflation continues to ease downward for a softer economic landing.
Still, EDC forecasts that the global economy will grow by 2.8% in 2024 (real – or inflated adjusted – GDP growth), down from an estimate of 3% in 2023, before seeing a stronger growth rate of 3.3% in 2025 – a pace more in line with a pre-pandemic trajectory.
The Canadian economy is forecasted to grow by only 0.8% in 2024 before seeing a more rapid growth rate of 2.0% in 2025.
The Canadian economy is forecasted to grow by only 0.8% in 2024 before seeing a more rapid growth rate of 2.0% in 2025. Factors behind its weak performance in 2024 include elevated borrowing costs and tame external demand as Canada’s trading partners also face slow growth conditions.
| Global Economic Outlook | 2022 | 2023* | 2024* | 2025* |
|---|---|---|---|---|
| Developed Countries | 2.6 | 1.8 | 1.1 | 1.8 |
| Canada | 3.8 | 1.1 | 0.8 | 2.0 |
| United States | 1.9 | 2.5 | 1.2 | 1.8 |
| Eurozone | 3.4 | 0.5 | 0.8 | 1.4 |
| Germany | 1.9 | -0.2 | 0.4 | 1 |
| France | 2.5 | 0.8 | 0.8 | 1.2 |
| Developing Countries | 4.1 | 3.9 | 4.1 | 4.3 |
| China | 3 | 5.1 | 4.6 | 4.4 |
| India | 7.3 | 7.5 | 6 | 6.6 |
| Indonesia | 5.3 | 4.9 | 4.7 | 5.3 |
| Brazil | 3.1 | 3 | 1.5 | 2.3 |
| Mexico | 3.9 | 3.4 | 2.1 | 2.5 |
| World | 3.5 | 3 | 2.8 | 3.3 |
The Toronto region accounts for 65% of our provincial GDP1, and so our growth outlook can be best proxied by the expected growth of the Ontario economy. According to the Financial Accountability Office of Ontario’s latest projections, Ontario’s economy is expected to have grown by 1.2% in 2023, down from 3.9% in 2022 and 5.4% in 2021. A combination of high inflation, raised interest rates, and weak external demand are contributing to slow business and household activity.
...This outlook is expected to further weaken in the coming years, with growth forecasted at only 0.7% in 2024 as higher interest rates and mounting debt continue to weigh on households.
Even more concerning, this outlook is expected to further weaken in the coming years, with growth forecasted at only 0.7% in 2024 as higher interest rates and mounting debt continue to weigh on households. Weaker residential investment activity and US spending are also significant contributing factors. The job market is expected to follow suit with unemployment rising from 5.7% in 2023 to 6.8% in 2024, before lowering to 6.6% in 2025.
| Ontario Economic Growth | 2021 | 2022 | 2023* | 2024* | 2025-28 Avg.* |
|---|---|---|---|---|---|
| Ontario Real GDP Growth (%) | 5.4 | 3.9 | 1.2 | 0.7 | 0.7 |
| Employment and Unemployment Rates | 2022 | 2023 | 2024* | 2025* | 2026-28 Avg.* |
| Employment Growth (%) | 4.6 | 2.4 | 0.4 | 1.7 | 1.5 |
| Unemployment Rate (%) | 5.6 | 5.7 | 6.8 | 6.6 | 6.3 |
A key driver in our economic growth seen to date has largely been due to a rapid rise in population, as opposed to growth resulting from investment. According to TD bank’s latest forecast of Ontario: “the fastest population growth in decades is providing a key underpinning to the overall expansion, masking a soft performance in per-capita consumption this year.” According to the Ministry of Finance’s projections, this is expected to continue.
Ontario’s population is forecasted to grow by 44% – or 6.6 million people – between 2022 and 2046.
Ontario’s population is forecasted to grow by 44% – or 6.6 million people – between 2022 and 2046. On a per capita basis, Ontario ranks 51st out of the 60 Canadian provinces and US states in terms of GDP per capita.
Population growth is not a sustainable driver of economic growth, and in fact could erode overall standard of living if the value added by each additional worker is lower than the province’s current average. Instead, we should be looking to grow productivity as a long-term solution to our economic growth challenges.
Economic growth is central to improving the livelihoods of not just Toronto’s residents, but the entire province. Rising economic activity – most often measured by GDP – means people and businesses are spending, and more opportunities are available for individuals to work in jobs with better pay. Conversely, a slowdown in growth is often accompanied with rising unemployment and flattening incomes.
Productivity growth – or the ability to convert labour and capital inputs into value – is central to achieving stable long-term economic growth.
Slower economic growth, particularly as the population continues to rise, means standards of living may stagnate or decline as governments struggle to fund public expenditures on goods and services, and critical infrastructure like roads, schools, and hospitals. Already the evidence demonstrates there is a significant ‘prosperity gap’ between the Toronto region and its US peers. This is also illustrated in a recent finding that Toronto CMA had the lowest median income in 2019 of the 15 largest metropolitan areas in North America. Productivity growth – or the ability to convert labour and capital inputs into value – is central to achieving stable long-term economic growth.