Prime Minister Mark Carney aims to make Canada the strongest economy in the G7, a goal that presents significant challenges. Achieving this will require advancing large-scale energy, mining, and infrastructure projects over the next one to five years. It will also necessitate streamlining project assessments and environmental permitting processes in Ottawa. Additionally, Carney must address recent tax policy changes in the United States that have put Canada at a competitive disadvantage for attracting new business investments.

Carney has taken office amid a struggling economy marked by years of weak business investment and stagnant productivity growth. The situation has been exacerbated by the threat of new tariffs from Canada’s primary trading partner. During Justin Trudeau’s nearly ten years in office, the economy relied heavily on two main drivers: an expanding public sector and a surge in population fueled by immigration. The federal and provincial governments increased spending and borrowing, which provided a temporary economic boost but also contributed to rising government debt.

From 2016 to 2024, Canada experienced the fastest population growth among advanced economies, largely due to high immigration levels. This influx of newcomers created additional demand for goods, services, and housing, while also expanding the workforce. However, this population growth has not translated into increased prosperity or improved living standards on a per capita basis. Now, the previous engines of economic growth appear to be losing momentum.

Carney has suggested that budget deficits may increase even further than those of his predecessor. However, Canada is entering a period of fiscal austerity, driven by pressures from bond markets and credit-rating agencies to control spending and reduce deficits. It is uncertain whether an expanding government can effectively stimulate a struggling economy in the coming years.

The federal government’s revised immigration plan, announced last fall, aims to significantly reduce the number of permanent immigrants and non-permanent foreign residents. After a decade of rising immigration, Canada is expected to see a decline in population growth over the next three years. This demographic shift could hinder economic growth, even as Carney's administration seeks to revitalize the economy.

Recent data from Statistics Canada indicates that the population did not grow between the fourth quarter of 2024 and the first quarter of this year. This stagnation reflects both a decrease in new permanent immigrants and a reduction in the non-permanent resident population, aligning with the new immigration targets.

With population growth stalling and fiscal pressures mounting, the only viable path for economic growth may be to revitalize the private sector. This will require a shift in strategy from the approach taken by Trudeau’s government. Ottawa must focus on creating a more favorable business environment to encourage companies, entrepreneurs, and investors to invest in and expand their operations in Canada. Without these changes, Carney may struggle to achieve his goal of making Canada the G7's economic leader.