Business · Economy · 3 hrs ago
Canada's budget watchdog lowers growth forecasts amid U.S. tariffs
Canada's Parliamentary Budget Office cut its growth forecasts for this year and 2027.
It now expects the economy, measured by real gross domestic product, to grow by 0.9 per cent in 2026 and 1.5 per cent in 2027, down from its June estimates of 1.1 and 1.6 per cent.
The weaker outlook follows new U.S. tariffs and Canadian countermeasures after trade talks between the countries broke down at the end of August.
The watchdog projects a federal deficit of $63.3 billion in the 2026-27 fiscal year, rising to a peak of $70.2 billion in 2027-28.
It says deficits will average $3 billion more a year than previously forecast from 2026-27 to 2030-31, as new spending outweighs stronger revenues.
The office also expects Canada's debt-to-GDP ratio to rise steadily over the next five years.
It assumes the Bank of Canada will begin raising its policy rate in early 2027, reaching 2.75 per cent by mid-year.
Canada’s Parliamentary Budget Office has lowered its economic growth forecasts for 2026 and 2027 amid new U.S. tariffs and Canadian countermeasures.
It now expects real GDP growth of 0.9 per cent in 2026 and 1.5 per cent in 2027.
Those forecasts are down from June estimates of 1.1 per cent and 1.6 per cent, respectively.
The PBO projects a budget deficit of $63.3 billion in 2026-27, rising to $70.2 billion in 2027-28.
It says deficits will average $3 billion more per year than in its June outlook from 2026-27 to 2030-31.
- Who
- Canada’s Parliamentary Budget Office.
- What
- It lowered its economic growth forecasts and raised its deficit projections.
- When
- The revised outlook was reported on October 20, 2026.
- Where
- Canada.
- Why
- The PBO cited new U.S. tariffs and Canadian countermeasures. Trade talks between Canada and the U.S. broke down at the end of August.
This story does not have two clearly opposing sides.
The PBO estimated growth of 1.1 per cent for 2026 and 1.6 per cent for 2027.
Trade talks between Canada and the U.S. broke down, followed by new U.S. tariffs and Canadian countermeasures.
The PBO reported lower growth forecasts and higher projected deficits.
- 2026 growth forecast
- 0.9 per cent
- 2027 growth forecast
- 1.5 per cent
- 2026-27 projected deficit
- $63.3 billion
- 2027-28 projected deficit
- $70.2 billion
- Average annual deficit increase
- $3 billion over 2026-27 to 2030-31 versus the June outlook