Canada’s economy is expected to grow modestly in 2026, according to Deloitte, as increasing geopolitical risks, trade uncertainty and structural challenges weigh on momentum, although political stability and investment provide partial support.
Real GDP growth is expected to be about 1.2 percent in 2026, slowing from 1.7 percent in 2025. This reflects a cautious economic environment characterized by higher energy prices, subdued consumer demand and weaker labor market conditions, Deloitte said in its latest “Spring Outlook”.
Canada’s economy is expected to grow moderately by 1.2 per cent in 2026 and slow from 2025 due to geopolitical risks, trade uncertainty and weak consumer demand. Stable inflation near 2 percent is likely to keep interest rates unchanged, while subdued employment weighs on spending. Investments in energy and infrastructure provide support, although regional differences and external risks continue to cloud the outlook.
The ongoing conflict in the Middle East and uncertainty surrounding the Canada-US-Mexico Agreement (CUSMA) remain key external risks.
Inflation has fallen, with headline inflation at 1.8 per cent in February and expected to remain close to the Bank of Canada’s 2 per cent target by 2026. This stable inflation outlook, combined with slower growth, is expected to keep the key interest rate unchanged at 2.25 percent throughout the year, supporting economic stability.
Consumer spending is expected to remain subdued as households face higher energy costs and a weak labor market. Employment conditions are subdued as manufacturing job losses and limited wage growth slow income growth. The unemployment rate is expected to gradually fall to 6.3 percent by year-end, largely due to slower labor force growth rather than strong hiring.
Regarding investment, business sentiment remains cautious but is expected to gradually improve. Large infrastructure and energy projects, including nuclear, LNG and transmission developments, are expected to support capital spending and attract private investment in the medium term.
Trade is expected to provide slight support, with exports expected to grow by around 2 percent in 2026, supported by tariff relief in key sectors and stronger global demand for resources. However, ongoing trade uncertainty and possible disruptions remain significant downside risks.
Regionally, growth prospects vary, with energy-driven provinces such as Alberta and Saskatchewan expected to outperform, while manufacturing-intensive regions such as Ontario and trade-intensive provinces face stronger headwinds.
Overall, Canada’s economic outlook for 2026 remains stable but is characterized by cautious optimism, with recovery dependent on trade clarity, continued investment and an easing of geopolitical tensions.
Fibre2Fashion News Desk (SG)