The influx of newcomers to Canada under Ottawa’s increased immigration targets will boost real GDP in Ontario and Quebec by up to $3.8 billion collectively in the next three years, playing a key role in the provinces’ recovery from the pandemic and beyond, a new Scotiabank Economics report says.

By 2023, this target boost will add up to $2.9 billion to Ontario’s real GDP and up to $0.9 billion to Quebec’s real GDP, gains that come even after accounting for the challenging job market conditions that newcomers often face during a downturn, the report added.

“Importantly, we also estimate that beyond 2022—once the boost related to reopening from lockdowns is behind us—immigration will account for about half of the economic growth generated in both Ontario and Quebec,” wrote Scotiabank’s Senior Economist Marc Desormeaux in the report.

The federal government in October raised its immigration targets to “compensate for the shortfall and ensure Canada has the workers it needs to fill crucial labour market gaps and remain competitive on the world stage.”

Ottawa said it planned to continue welcoming immigrants at a rate of 1% of the population of Canada, including 401,000 permanent residents in 2021, 411,000 in 2022 and 421,000 in 2023. That’s up from pre-pandemic immigration targets of 351,000 and 361,000 in 2022 and 2023, respectively.

“Immigration is a key element of economic growth in any economy, but that is especially true in Canada,” the report says. “Fundamentally, it impacts the size, age structure, and skill set of the pool of individuals available to work and produce goods and services. In Canada, governments have steadily ramped up their annual intake since 2015, and as a result, the country was the only G7 member whose headcount was accelerating before COVID-19.”

Last year, immigrants comprised 34% of the working age population in Ontario and 17% in Quebec, Desormeaux added. 

However, immigration has fallen considerably during the past year, amid border closures and travel restrictions related to the pandemic. 

The revised immigration targets and greater newcomer admissions to Canada will deliver “clear and significant economic benefit” to Canada’s two largest provinces, Scotiabank Economics’ forecast modelling shows.

Efforts to help newcomers integrate into the labour market in the medium term could fuel further economic growth. Scotiabank Economics estimates that if long-run participation rates for immigrants were brought in line with the mean for Canadian-born workers, it could add an additional $12-$20 billion to Ontario’s real GDP in each of the next five years. 

The business community also has a role to play in closing these historical immigrant labour market gaps, the report adds, such as helping newcomers increase their financial literacy and build up personal and professional support networks. 

Dan Rees, Scotiabank’s Group Head of Canadian Banking, said in a recent op-ed that these strategies, as well as diversifying recruitment and assistance for newcomers to get their professional credentials recognized in Canada, are key.

“For Canada to prosper in a rapidly changing world, we must ensure everyone has the opportunity to contribute,” Rees said. “One important way to achieve that goal is by ensuring the seamless integration of new Canadians and creating conditions that allow them to participate fully in the economy. Governments at all levels have a role to play, and so do businesses, including Canada’s financial institutions.”

Another important factor is policies that foster an environment conducive to business investment, which will in turn ensure sufficient demand for this pool of skilled newcomers, Desormeaux writes. A temporary 25% matching grant for investment in machinery, equipment and intellectual property can help spur capital outlays as businesses recover from the pandemic, he writes in the report. 

“Canada’s immigration success story is by now well-documented; we contend that just as it supported the country’s pre-pandemic expansion, under the right conditions, it can help chart a course to recovery from COVID-19,” Desormeaux says.