OECD cuts Canada's 2025 and 2026 growth forecasts to 0.7% from 2%

OECD cuts Canada's 2025 and 2026 growth forecasts to 0.7% from 2%

The Organization for Economic Cooperation and Development (OECD) has recently revised down Canada's economic growth forecast for 2025 and 2026. The new projections indicate a significant decrease from the previous 2% estimate, with growth expected to average only 0.7% during these years [1].

This revision comes amidst growing uncertainty surrounding the global economic landscape, particularly the ongoing trade tensions between major economies. The Bank of Canada's Monetary Policy Report, released in January 2025, highlights the potential impacts of US tariffs on the Canadian economy [2]. Although no new tariffs have been imposed at the time of writing, the threat of them has already caused significant uncertainty and disruption to financial markets and business decisions.

The Canadian economy has shown signs of improvement in recent months, with inflation remaining close to the target of 2% and economic growth projected to strengthen [2]. However, the potential impacts of trade tensions cannot be ignored. The Bank of Canada's report estimates that if significant new tariffs were to be imposed, the Canadian economy could experience a decline in exports, a decrease in business investment, and a potential increase in inflation [2].

The global economy is also expected to grow at a slower pace than previously anticipated, with growth projected to average around 3% in 2025 and 2026 [2]. This slower growth is attributed to a range of factors, including ongoing trade tensions, geopolitical risks, and a potential slowdown in population growth.

Despite these challenges, the Canadian economy is expected to remain resilient, with household spending anticipated to remain robust and excess supply gradually dissipating over the projection period [2]. However, the potential impacts of trade tensions cannot be underestimated, and ongoing uncertainty is likely to continue influencing the economic outlook for Canada and the global economy as a whole.

References:
[1] OECD. (2025). Economic Outlook: Interim Report. Retrieved from https://www.oecd.org/economic-outlook/
[2] Bank of Canada. (2025). Monetary Policy Report: January. Retrieved from https://www.bankofcanada.ca/publications/mpr/mpr-2025-01-29/