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.

GDP growth is projected to strengthen over 2026 and 2027, reaching 1.3% and 1.7% respectively, as the economy recovers from the trade slowdown in 2025 following higher US tariffs. A rebound in trade is expected to support a gradual pickup in business investment, while household consumption picks up as uncertainty fades. 

Headline inflation is expected to remain close to 2%, with a temporary uptick in 2026 as the downward impact of the fuel charge removal disappears. Core inflation is projected to continue moderating, reflecting lower wage growth and a widening output gap. With inflation pressures easing, the Bank of Canada has resumed rate cuts, but no further cuts are expected at this stage. Fiscal policy has become more accommodative, reflecting targeted support for sectors most affected by tariffs, broader tax reductions and increased defence spending. A key policy priority remains strengthening Canada’s weak productivity growth by fostering investment, promoting innovation, and advancing digitalisation.