Key Takeaways
- Canada is expected to maintain a "status quo" trade relationship with the United States in 2026, with no significant changes to its access to the U.S. market.
- The country’s GDP is forecast to grow by 1.5 per cent in 2026, a deceleration from 1.7 per cent growth seen in 2025.
- Progress on government-backed infrastructure projects is expected to help revive sluggish investment by private businesses at home.
- The Bank of Canada is expected to maintain its policy rate at 2.25 per cent throughout 2026.
- Canada-U.S. trade negotiations have been ongoing since President Donald Trump started his second term in early 2025, but Deloitte’s chief economist Dawn Desjardins predicts that this year’s review of the Canada-United States-Mexico Agreement (CUSMA) will not leave Ottawa in a materially worse trade position than it has today.
Introduction to Canada’s Economic Forecast
The economic forecast for Canada in 2026 is looking positive, with Deloitte predicting a GDP growth of 1.5 per cent. This is slightly lower than the 1.7 per cent growth seen in 2025, but still a significant increase. According to Deloitte’s chief economist Dawn Desjardins, the forecast is based on the assumption that Canadian companies will continue to have relatively tariff-free access to the U.S. market. This is despite ongoing trade negotiations between Canada and the U.S., which have been taking place since President Donald Trump started his second term in early 2025.
Canada-U.S. Trade Relationship
The Canada-U.S. trade relationship is a crucial factor in Canada’s economic forecast. Deloitte’s forecast assumes that the current trade conditions will continue, with no significant changes to Canada’s access to the U.S. market. This is based on the fact that 95 per cent of Canada’s exported goods to the U.S. are CUSMA-compliant, and therefore not subject to American tariffs. Additionally, 100 per cent of Canada’s energy exports are CUSMA-compliant. Desjardins notes that while the trade negotiations have been ongoing, she expects the review of the Canada-United States-Mexico Agreement (CUSMA) to maintain the current trade position, without any significant changes.
Impact of Government-Backed Infrastructure Projects
The Canadian government’s infrastructure plans are also expected to play a significant role in the country’s economic forecast. The federal government’s new Major Projects Office (MPO) has approved the first two tranches of projects, which represent $116 billion in investments. These projects include plans for nuclear reactors, LNG facilities, hydroelectric projects, and mines for critical minerals. Desjardins notes that progress on these projects will help inspire more private-sector investment, as Canadian companies are waiting for clarity on the future of these projects before investing. She expects business investment to remain subdued for the first and second quarters of 2026, before a rebound in the back half of the year.
Bank of Canada’s Policy Rate
The Bank of Canada’s policy rate is also expected to remain steady in 2026, at 2.25 per cent. This is according to Deloitte’s forecast, which notes that the bank is likely to maintain its current policy rate throughout the year. Desjardins notes that the bank’s decision will be based on a variety of factors, including the state of the economy and inflation rates. However, she expects the policy rate to remain steady, as the bank seeks to balance the need to support economic growth with the need to keep inflation under control.
Conclusion
In conclusion, Canada’s economic forecast for 2026 is looking positive, with a predicted GDP growth of 1.5 per cent. The country’s trade relationship with the U.S. is expected to remain relatively stable, with no significant changes to its access to the U.S. market. Progress on government-backed infrastructure projects is expected to help revive sluggish investment by private businesses at home, while the Bank of Canada is expected to maintain its policy rate at 2.25 per cent throughout 2026. Overall, Deloitte’s forecast suggests that Canada is well-positioned for economic growth in 2026, despite some challenges and uncertainties.