Long Descriptions - Update of Long-Term Economic and Fiscal Projections 2018
In 1995, there were 3.5 million seniors aged 65 and over, lower than the 6 million children under the age of 15. This changed as of 2015, when the 65 and older reached 5.8 million and outnumbered the 5.7 million under the age of 15. This gap is expected to increase over the next 20 years as the population aged 65 and older grows at a faster rate than the number of children under the age of 15. In 2035, there are expected to be 10.1 million seniors aged 65 and older compared to 6.7 million children under the age of 15.
The number of working-age Canadians (aged 15 to 64) for every senior (aged 65 and over) is expected to fall from 5.1 in 2008 to 2.6 in 2035 and even further to 2.4 by 2055.
While there have been annual variations in the actual labour force participation rate, the trend labour force participation rate increased from slightly less than 62 per cent in the mid-1970s to a peak slightly above 67 per cent in 2008. An aging population has already led and will continue to lead to a rapid reduction in the overall rate of labour force participation, which is expected to fall below 62 per cent within two decades.
Real GDP growth averaged 4.8 per cent per year between 1950 and 1979 and 2.4 per cent per year between 1980 and 2017. Going forward, the increase in the pace of population aging is expected, under baseline assumptions, to reduce real GDP growth to an average of 1.7 per cent per year between 2018 and 2055.
In 2017-18, the federal government posted a $19.0-billion deficit. The deficit for 2018-19 is forecast at $18.1 billion. Thereafter, the federal budgetary balance is projected to improve from a $19.6-billion deficit in 2019-20 to an $11.4-billion deficit in 2023-24. The budgetary balance-to-GDP ratio is projected to improve from -0.9 per cent in 2017-18 to -0.4 per cent in 2023-24.
Historically, the federal debt-to-GDP ratio has increased from 29.2 per cent in 1980-81 to a peak of 66.8 per cent in 1995-96 before falling to its lowest point of 28.3 per cent in 2008-09. It has since then slightly climbed back up to 31.4 per cent in 2017-18. Over the medium term, the federal debt-to-GDP ratio is projected to continuously decline from 30.9 per cent in 2018-19 to 28.5 per cent in 2023-24.
Starting from a stronger medium-term forecast, the federal budgetary balance-to-GDP ratio under the updated projection declines to a maximum deficit of 0.5 per cent during the late 2020s as population aging pressures increase. As population aging pressures ease, the budgetary balance-to-GDP ratio gradually improves to reach a surplus of 1.2 per cent in 2055-56.
Starting from a stronger medium-term forecast, the federal debt-to-GDP ratio is expected to fall from 28.5 per cent in 2023-24 to 2.4 per cent in 2055-56.
Under baseline nominal GDP growth from the full September survey, the budgetary balance is expected to attain a surplus position in the early 2040s and continue improving thereafter to reach a budgetary balance-to-GDP ratio of 1.2 per cent in 2055-56. In the Top Four scenario, where the nominal GDP growth rate is 0.4 percentage points higher per year, on average, over the next five years than under the baseline full September survey, there is a more rapid increase in the budgetary balance. This results in a faster return to a surplus position and a higher budgetary balance-to-GDP ratio of 1.9 per cent in 2055-56. On the other hand, in the Bottom Four scenario, where the nominal GDP growth rate is 0.4 percentage points lower per year, on average, over the next five years than under the baseline full September survey, there is a slower return to a surplus position and a lower budgetary balance-to-GDP ratio of 0.6 per cent in 2055-56.