Archived - Update of Long-Term Economic and Fiscal Projections 2017: text version

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.

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 61 per cent within about 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 2016. Going forward, the increase in the pace of population aging is expected, under baseline assumptions, to reduce real GDP growth to an average of 1.8 per cent per year between 2017 and 2055.

Starting from a stronger medium-term forecast, the federal budgetary balance-to-GDP ratio under the updated projection declines to a maximum deficit of 0.7 per cent during the late 2020s as population aging pressures increase compared to a maximum deficit of 1.1 per cent under the December 2016 projection. As population aging pressures ease, the budgetary balance-to-GDP ratio gradually improves to reach a surplus of 1 per cent in 2055-56 versus a surplus of 0.3 per cent under the December 2016 projection.

Starting from a stronger medium-term forecast, the federal debt-to-GDP ratio is expected to fall from 28.5 per cent in 2022-23 to 6.9 per cent in 2055-56 compared to the December 2016 projection of 17.3 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 surplus of about 85 billion dollars in 2055-56. In the Top Four scenario, where the nominal GDP growth rate is 0.3 percentage points higher per year, on average, over the next five years than under the baseline full September survey, there is a more rapid improvement in the budgetary balance resulting in a faster return to a surplus position and a higher surplus of close to 160 billion dollars in 2055-56. On the other hand, in the Bottom Four scenario, where the nominal GDP growth rate is 0.3 percentage points lower per year, on average, over the next five years than under the baseline full September survey, the improvement in the budgetary balance is much flatter resulting in a smaller surplus of slightly less than 20 billion dollars in 2055-56.