GDP growth is expected to strengthen over 2026 and 2027, reaching 1.2% and 1.7% respectively, as the economy recovers from the 2025 trade‑related slowdown triggered by higher US tariffs. Household consumption and government spending on defence and infrastructure will continue to underpin growth, while business investment should recover gradually. Given Canada’s position as a net energy exporter, exporters are set to benefit from higher energy prices linked to the Middle East conflict. Headline inflation is set to rise temporarily before easing back toward 2% over the projection horizon, while core inflation should remain closer to target, restrained by persistent economic slack.

Monetary policy has remained on hold at 2.25% since October 2025 and is expected to stay unchanged in the near term, as the Bank of Canada is set to look through temporary energy‑related price increases given the remaining economic slack. Fiscal policy is projected to ease further in 2026, with a broadly neutral stance assumed for 2027, which appears appropriate. Key policy priorities are advancing internal market reforms, improving trade diversification and infrastructure delivery, and accelerating digitalisation.

Canada’s GDP per capita (in PPP) is slightly above the OECD average but remains below that of top-performing countries, despite significant potential for higher levels thanks to strong institutions, a highly skilled workforce, and abundant natural resources. This gap is largely due to a below-average productivity level, which has declined further relative to top-performing economies in recent years. The capital stock per worker also remains below average. While overall labour utilisation is high, female labour force participation continues to lag slightly that of men.

Policy priorities should focus on boosting sluggish productivity growth by enhancing investment in physical and digital infrastructure and fostering a more competitive and dynamic business environment. Further key actions include reducing interprovincial barriers to trade and labour mobility, and lowering entry barriers in regulated sectors, including restrictions on foreign investment in these sectors. Labour utilisation among women and other underrepresented groups, such as immigrants, also has room for improvement.