PBO Cuts Canada Growth Outlook, Sees Bigger Deficits and Rising Debt-to-GDP

09:34 AM EDT, 09/25/2025 (MT Newswires) -- Canada's Parliamentary Budget Officer (PBO) Thursday revised down its economic outlook, citing increased trade uncertainty and the impact of tariffs.

Real gross domestic product is now projected to grow 1.2% in 2025 and 1.3% in 2026, compared with March forecasts of 1.7% and 1.5%, respectively, the PBO said.

While growth is expected to rebound to 1.8% in 2027, structurally weaker trade conditions are projected to leave the level of real GDP about 0.5% lower by 2030

Nominal GDP, the broadest measure of the government's tax base, is projected to be $12.9 billion lower annually, on average, over 2025 to 2029, primarily due to the lasting impact of tariffs and less favorable trading conditions with the United States.

PBO projects the budgetary deficit to increase "sharply" from $51.7 billion (1.7% of GDP) in 2024-25 to $68.5 billion (2.2% of GDP) in 2025-26, reflecting weaker economic growth and additional measures impacting both revenues and expenses.

Assuming no new measures are introduced and existing temporary measures sunset as scheduled, the budgetary deficit is projected to decline slightly but remain close to $60 billion through the medium term as growth in revenues only slightly outpaces growth in expenses, it added.

Due to persistent budgetary deficits of over 1% of GDP, the federal debt-to-GDP ratio is projected to increase from 41.7% in 2024-25, rising above 43% over the medium term. Compared with PBO's March outlook, the federal debt-to-GDP ratio is 4.5 percentage points higher in 2029-30 and is no longer projected to be on a declining path over the medium term.

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