Canada’s economy is expected to post modest growth through 2026 as government stimulus and improving business investment help offset ongoing uncertainty, according to a new forecast from the Conference Board of Canada that points to trade negotiations later in the year as a key risk factor.
The independent research organization says gross domestic product rose an estimated 1.7 per cent in 2025 and is projected to grow a further 1.3 per cent in 2026, even as economic uncertainty continues to weigh on activity.
Budget stimulus and trade talks in focus
The forecast highlights the federal government’s latest budget and anticipated Canada–U.S.–Mexico Agreement negotiations as pivotal influences on the outlook.
“While the Canada–U.S.–Mexico Agreement negotiations later in 2026 could either support or hinder growth, we anticipate the latest federal budget will undoubtedly boost economic activity,” said Cory Renner, director of economic forecasting at the Conference Board of Canada. “In one way or another, the budget will help growth prospects in every area of the economy, from trade and investment to housing and consumers.”
Cory Renner
The Conference Board said economic conditions remain unsettled, but noted signs of improvement in several areas. It cited better business investment, rising consumer confidence and the expectation that trade disputes will eventually be resolved as factors supporting the medium-term outlook.
The organization did not quantify the impact of the budget measures, but said the stimulus is expected to lift activity across multiple segments of the economy.
Labour market to slow later in 2026
Canada’s labour market is expected to enter 2026 in relatively solid shape, supported by momentum built in recent periods, the report said. However, that strength is forecast to fade later in the year.
The Conference Board pointed to slower population growth following a reduction in immigration levels, alongside planned reductions in the federal workforce, as factors that will weigh on employment gains. Job growth is expected to slow in the second half of 2026 and extend into 2027 as those effects take hold.
The organization said these developments will temper labour market performance despite the firmer footing at the start of the year.
Housing pressures persist
The outlook for Canada’s housing market remains challenging, according to the forecast, despite some recent signs of improvement.
The Conference Board said slight gains in resale housing affordability and strong levels of housing starts have not been enough to overcome broader headwinds. Economic uncertainty, slower population growth and labour market conditions are continuing to affect both homebuyers and builders.
As a result, housing activity is expected to ease over the next few years as these pressures persist, the report said. No timeline or magnitude was provided for the anticipated slowdown.
U.S. outlook and trade tensions
The Conference Board also assessed conditions in the United States, noting that while the U.S. economy has remained resilient over the past year, signs of weakness have begun to emerge.
According to the forecast, a government shutdown weighed on U.S. growth in the third and fourth quarters of 2025. More concerning, the organization said, are rising inflation and unemployment following recent tariff announcements.
The Conference Board projects U.S. economic growth of 1.8 per cent in 2025, slowing slightly to 1.7 per cent in 2026.
Those developments are expected to have spillover effects for Canada, particularly through trade.
Export outlook subdued
Canada’s export performance is expected to remain under pressure as tariffs and ongoing trade tensions continue to weigh on demand, especially in the context of softer U.S. growth.
The Conference Board said the export outlook remains subdued, with trade disputes limiting gains in the near term. While those disputes are expected to ease toward the end of 2026, the organization cautioned that the recovery may be uneven.
If key sectors remain subject to tariffs, export growth could continue to lag even as broader trade tensions begin to ease, the report said.
Investment expected to rebound
Business investment struggled in 2025, according to the forecast, as U.S. tariffs and economic uncertainty discouraged spending. The Conference Board said those factors held back investment decisions across the economy.
Looking ahead, the organization expects investment growth to resume beginning in 2026, supported by favourable policies and government-led initiatives in areas such as defence, energy and transportation.
Investment in non-residential structures is forecast to see the strongest gains as conditions improve, the report said, marking a shift from the weakness observed in the previous year.
The Conference Board characterized the overall outlook as one of cautious improvement, with policy decisions and trade developments set to play a decisive role in shaping Canada’s economic performance through 2026.
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 and 2025.
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