Canada’s economy looks set for a year of modest growth in 2026, according to a recent report by TD.
“Provincially, energy-producers like Alberta, Saskatchewan, Newfoundland and Labrador and B.C. are forecast to outperform. Higher energy prices will challenge oil importers like Ontario and Quebec, layering on a new headwind alongside trade frictions with the U.S. Higher energy costs will also weigh on many Atlantic provinces in the near-term, given energy accounts for a larger share of household budgets,” said the report.
“A rapid shift higher in oil prices will lend some near-term support to producer and government revenues in Alberta, Saskatchewan, and Newfoundland and Labrador. We don’t anticipate major price growth across other commodities, but still-elevated price levels should support ongoing production and investment.”
The report said the recent U.S. Supreme Court ruling striking down the IEEPA tariffs is a net positive for Canada. Tariffs on non-USMCA compliant exports have now been reduced from 35% to 10%, marginally lowering the effective tariff rates across provinces. Provinces like Quebec, Ontario and BC will still face trade headwinds related to section 232 tariff products (steel, aluminum, lumber, and autos).
“The 2026 provincial budget season has kicked off with Alberta, New Brunswick, B.C. and Nova Scotia tabling their fiscal blueprints. Themes include lingering deficits, worsening debt burdens, a continued focus on capital investment and much slower program spending gains after this year. Notably, the latest capital spending intentions survey pointed to solid government investment growth in Ontario, Quebec and PEI, while other provinces benefit from past investments,” said TD.
“A soft start to the year underpins a downgrade to forecasts for Canadian home sales and average home prices. Ontario and B.C. see steep downgrades, as pent-up demand has generally remained sidelined. Meanwhile, Alberta’s market has rapidly rebalanced. Elsewhere, markets are tighter although several headwinds, like slowing population growth and cooling job markets, should ease price gains moving forward.
“Employment growth is expected to moderate coast-to-coast in 2026. At the same time, federal government caps on newcomers are blunting labour force growth. This is particularly the case in provinces like Ontario and BC, which will keep provincial unemployment rates moving lower through the year despite modest job gains.”
An economic breakdown for each province can be found here.
Mario Toneguzzi
Mario Toneguzzi is Managing Editor of Canada’s Entrepreneur. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He was named in 2021 and 2024 as one of the top business journalists in the world by PR News. He was also named by RETHINK to its global list of Top Retail Experts 2024, 2025 and 2026.
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