BMO Sees Canada's GDP Growth at 1.3% This Year; Slightly Lower Than in 2025

09:38 AM EST, 03/04/2026 (MT Newswires) -- The Canadian economy is still dealing with the burden of United States tariffs, but the impact is uneven across the country, and conditions are beginning to drift apart, said Bank of Montreal (BMO).

The bank is forecasting 1.3% real gross domestic product growth this year, down slightly from 1.7% in 2025. While activity around the turn of the year struggled, conditions should gradually improve over the course of the year -- that includes firmer growth and an ebbing unemployment rate.

The tariff situation remains a key uncertainty, and the U.S. Supreme Court ruling against IEEPA tariffs does little in the near term, given more aggressive use of sectoral tariffs, stated BMO.

In the meantime, the bank awaits the mid-2026 joint review of the CUSMA trade deal. The ongoing lack of certainty around the key trading relationship makes it difficult for firms to make major hiring and spending decisions.

On the positive side, past Bank of Canada easing continues to filter through the economy, pointed out BMO. A significant wave of federal fiscal stimulus has begun to roll out, including tax cuts, defense and infrastructure investment.

Most provinces are facing slower growth in 2026, but those exposed to non-energy U.S. exports are now clearly struggling the most -- that should continue to widen the regional disparity, added the bank.

According to BMO, the provincial Highlights are:

-- Alberta and Saskatchewan are expected to lead with growth near or above 2%, with Alberta topping the pack alongside firm oil prices.

-- British Columbia is also relatively sheltered, carrying the lowest U.S. export exposure in Canada, but sectoral tariffs on lumber hurt, real estate is struggling, and population growth has slowed sharply.

-- Ontario, Quebec and Manitoba are feeling the impact of tariffs. Ontario and Quebec are on track to grow around 1% this year, with Quebec at the back of the pack.

-- Atlantic Canada is still catching up to torrid population growth, even if that will continue to slow next year. Growth in the region is expected to fall to the 1.0%-to-1.5% range in 2026.

-- The 2026 budget season is underway, and the combined provincial deficit looks to remain elevated this year, along with borrowing requirements.

-- The regional disparity in economic conditions is widening alongside tariffs, geopolitical conflict, immigration caps, and varying real estate and job market conditions.

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