Canada's economic outlook for 2026 has softened, but brighter days are still expected in 2027. The Federal Budget and a refreshed immigration plan have introduced new dynamics, though recent economic data has been underwhelming. GDP growth is now projected at 0.9% for 2026, down from earlier expectations, due to slowing GDP and weak job numbers over the past three months.
The federal government's new spending measures, including investment tax breaks, are expected to add 0.2 to 0.3 percentage points to GDP growth in 2027. This spending supports the view that 2027 will be a stronger year for Canada, though the full benefits will take several years to materialize.
Immigration is also set to re-accelerate in 2027, thanks to a refreshed plan that creates a one-time wave of permanent residency for workers already in Canada. This population growth is expected to boost the economy by increasing the number of workers and consumers, leading to more spending and growth.
Despite the better news ahead, recent economic data has been messy. GDP is slowing, and jobs have been weak for three months. However, underlying details such as strong job postings and resilient credit card spending suggest that the broader economy is not yet derailing the cautiously optimistic outlook for 2027. The Bank of Canada is expected to hike rates a bit more, but growth rates are projected to almost double to 1.7% in 2027.