Key Takeaways
- The Canadian economy is forecasted to slow down to 1.5% growth in 2026, compared to 1.7% in 2025.
- The review of the Canada-U.S.-Mexico free trade agreement (CUSMA) in July is a key trend to watch, with potential changes posing a risk to Canada’s trading relationship with the U.S.
- The federal government’s plans to stimulate private sector investment, particularly in infrastructure and natural resource sectors, may help boost business investment.
- Government spending on defence and assistance to sectors impacted by U.S. tariffs will provide short-term support to the economy.
- Despite a slow start, the economy is expected to gain momentum in the second half of 2026, setting up for potential growth in 2027.
Introduction to the Forecast
A new report has forecasted that the Canadian economy will experience a slowdown in growth, with a predicted rate of 1.5% in 2026, down from 1.7% in 2025. However, Dawn Desjardins, chief economist at Deloitte Canada, remains cautiously optimistic that the economy will gain momentum throughout the second half of the year. Desjardins identifies two key trends to watch in 2026: trade and investment. The review of the Canada-U.S.-Mexico free trade agreement (CUSMA) scheduled for July is a crucial event that may impact Canada’s trading relationship with the U.S. Additionally, the federal government’s plans to stimulate billions of dollars in investment from the private sector, as outlined in its latest budget, may also play a significant role in shaping the economy.
The Impact of CUSMA Review
The CUSMA review is a pivotal event that poses a risk to Canada’s economy, particularly if changes restrict or eliminate access to the key American market. However, Desjardins’ baseline assumption is that Canada will be able to maintain its favourable trading relationship with the U.S. The review may lead to potential changes in trade policies, which could impact various sectors of the Canadian economy. Desjardins notes that the outcome of the review will be critical in determining the direction of the economy, and any changes that restrict trade could have significant consequences. Nevertheless, she remains optimistic that Canada will be able to navigate the review and maintain its strong trading relationship with the U.S.
Business Investment and Government Support
Desjardins also highlights the potential for the Canadian economy to hit a turning point in business investment, as firms gain clarity and see support from the federal government. The government’s plans to stimulate private sector investment, particularly in the infrastructure and natural resource sectors, may help boost business investment. The federal government’s latest budget outlines plans to invest in these sectors, which could provide a much-needed boost to the economy. Additionally, government spending on defence and assistance provided to sectors impacted by U.S. tariffs will also help support the economy in the short term. Desjardins notes that these measures will provide a temporary boost, but the key to long-term growth lies in increasing business investment and trade.
Economic Growth and Momentum
Despite the slow start to 2026, Desjardins expects the economy to pick up steam in the second half of the year. She notes that overall growth will likely be slower than in 2025, but the setup for 2027 looks promising if the economy can gain momentum in the second half of 2026. Desjardins’ forecast suggests that the economy will experience a gradual increase in growth, driven by increased business investment and trade. The federal government’s support measures, combined with the potential for a favourable CUSMA review outcome, may help drive growth and set the stage for a stronger economy in 2027. As the economy navigates the challenges and opportunities presented in 2026, Desjardins remains cautiously optimistic about the prospects for growth and development.
Conclusion and Outlook
In conclusion, the Canadian economy is forecasted to experience a slowdown in growth in 2026, but Desjardins remains optimistic that the economy will gain momentum in the second half of the year. The review of the CUSMA and the federal government’s plans to stimulate private sector investment are key trends to watch, and the outcome of these events will be critical in determining the direction of the economy. With the right combination of government support and business investment, the Canadian economy may be able to overcome the challenges posed by the slowdown and set the stage for growth and development in 2027. As the economy navigates the complexities of trade and investment, it is essential to remain vigilant and adapt to the changing landscape, and Desjardins’ forecast provides a valuable insight into the potential opportunities and challenges that lie ahead.