OECD Sees Canada's GDP Growth Strengthening In 2026, 2027 As Country Recovers From Trade Slowdown

11:00 AM EST, 12/02/2025 (MT Newswires) -- Canada's gross domestic product growth is projected to strengthen over 2026 and 2027, reaching 1.3% and 1.7% respectively, as the economy recovers from the trade slowdown in 2025 following higher United States tariffs, said the Organisation for Economic Co-operation and Development.

A rebound in trade is expected to support a gradual pickup in business investment, while household consumption picks up as uncertainty fades, wrote the OECD in its updated outlook for the world's economy presented Tuesday.

Canadian headline inflation is expected to remain close to 2%, with a temporary uptick in 2026 as the downward impact of the fuel charge removal disappears. Core inflation is projected to continue moderating, reflecting lower wage growth and a widening output gap, stated the OECD.

With inflation pressures easing, the Bank of Canada has resumed rate cuts, but no further cuts are expected at this stage.

Fiscal policy has become more accommodative, reflecting targeted support for sectors most affected by tariffs, broader tax reductions and increased defence and infrastructure spending.

Policy priorities in Canada should focus on revitalizing subdued productivity growth, added the 38-country organization. This entails promoting investment in productive assets, particularly digital technologies, and strengthening innovation.

Progress in improving the internal market through the removal of the Canadian Free Trade Agreement (CFTA) exemptions is welcome and should continue. Labor mobility would further benefit from nationwide recognition of professional qualifications, including international credentials.

Entry barriers in services and network industries also remain elevated and should be lowered, for example, by reducing international-ownership restrictions in telecommunications, according to the OECD. Existing research and development tax incentives could be streamlined for both smaller and larger firms and complemented by more direct support.

Expanding the supply of housing, especially affordable rental housing, also remains a priority.

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