OECD urges action on productivity, housing and climate as Canada’s economy slows

The OECD Economic Survey of Canada 2024, released May 23, outlines an updated macroeconomic assessment of the Canadian economy and provides policy recommendations to improve resilience and sustainability. According to the report, real GDP growth is projected to slow from 1.5 per cent in 2024 to 1.0 per cent in 2025, with only a modest uptick to 1.1 per cent expected in 2026. The outlook is weighed down by ongoing trade tensions, particularly with the United States, and the uncertainty surrounding tariffs.

“Canada’s policy framework for macroeconomic stability remains strong, with robust public finances and a well-capitalised banking sector,” says OECD Chief Economist Álvaro Pereira, presenting the Survey in Ottawa. “There is room to improve the efficiency of the tax system and further reduce risks from the mortgage market, where high debt weighs on household finances and financial stability. To boost long-term growth prospects in a sustainable way, more needs to be done to raise productivity and tackle climate-related risks.”

Implications for Canada’s hotel and tourism sector

The OECD’s findings carry significance for Canada’s hotel and tourism industries, which are directly impacted by macroeconomic shifts. Slowing economic growth and diminished consumer spending power can suppress demand for travel and leisure, while the country’s persistent housing affordability issues continue to affect the ability of operators to recruit and retain workers, particularly in urban and seasonal markets.

The report calls attention to internal barriers that limit economic dynamism, such as fragmented labour markets and restricted interprovincial mobility. These issues are relevant to the hospitality sector, which often relies on a mobile and regionally diverse workforce. Improving mutual recognition of qualifications and reducing regulatory fragmentation across provinces could help address these challenges.

Productivity lag demands coordinated reform

The OECD stresses that Canada’s productivity growth has consistently lagged top-performing OECD countries for several decades. Current trade frictions and weak business investment risk compounding this problem. The report outlines several areas where reforms could enhance productivity, including:

• Reducing internal trade barriers to enable greater labour and business mobility.
• Facilitating foreign investment by lowering existing restrictions to attract more capital.
• Streamlining research and development tax incentives and increasing direct support to stimulate business innovation.

These measures, the report notes, could contribute to a more competitive, innovation-driven economy.

Housing affordability remains a critical concern

The OECD highlights housing affordability as a major structural issue, with strong price and rent growth reducing accessibility in many parts of the country. The report recommends that governments:

• Reform restrictive zoning regulations.
• Expedite the permitting process to accelerate new housing construction.

Such measures, it argues, would help ease price pressures and improve access to housing for Canadians, including those working in lower-wage sectors such as hospitality.

Climate adaptation and risk management

Considering rising temperatures and the increasing frequency of extreme weather events, the OECD calls for a shift from reactive disaster recovery to proactive climate risk management. It recommends:

• Investing in climate-resilient infrastructure.
• Restricting land development in high-risk flood and fire zones.
• Expanding insurance coverage to better protect against environmental risks.

These strategies are aimed at enhancing the resilience of communities and the broader economy in the face of climate-related disruptions.

A timely message for a new Parliament

The OECD Economic Survey of Canada 2024 arrives as Canada’s federal government returns to Parliament following a national election. The report offers a timely and independent policy roadmap that aligns with several key areas of national concern—including competitiveness, housing supply, labour market efficiency and climate resilience.

For hotel and tourism operators, many of the OECD’s recommendations reflect systemic issues already being felt on the ground. As the new government sets its policy direction, the report underscores the need for coordinated, evidence-based action to strengthen Canada’s economic foundations and ensure sustainable growth across all sectors.

The full report is available at: www.oecd.org/economy/canada-economic-snapshot