Organization says there are two keys to unlocking Canadian growth
Canada’s economy will grow by just 1% in 2025 and only 1.1% in 2026 according to the OECD.
The economic forum’s Economic Survey of Canada projects the slowdown in GDP from 1.5% in 2024 due to trade tensions with the US. But this is actually an improvement from just a few months ago then the OECD was warning of just 0.7% growth in GDP this year.
The latest update notes the resilience of the Canadian economy but says the impact of US and retaliatory tariffs and trade uncertainty have weakened the outlook, with fiscal and monetary policy easing potentially required if the economic situation significantly worsens while tariff-related inflation remains controlled.
“Canada’s policy framework for macroeconomic stability remains strong, with robust public finances and a well-capitalised banking sector,” OECD Chief Economist Álvaro Pereira said, presenting the Survey in Ottawa. “There is room to improve the efficiency of the tax system and further reduce risks from the mortgage market, where high debt weighs on household finances and financial stability. To boost long-term growth prospects in a sustainable way, more needs to be done to raise productivity and tackle climate-related risks.”
The Investment Industry Association of Canada has also been recently calling for tax reforms to shore up the economy.
The OECD warns that Canada’s productivity, which has lagged the best-performing OECD countries for some years, could slip further behind due to current trade tensions. Reducing barriers to labour mobility such as improving mutual recognition of qualifications across provinces could help productivity.
The organization also recommends encouraging foreign investment by reducing barriers and streamlining research and development tax incentives for both smaller and larger companies and stepping up direct support would help boost business research and development spending.
Getting more women into the workforce though improved affordability of childcare could help address underrepresentation in key technical and leadership roles and improve gender gaps in working hours and wages.
Boosting housing affordability with measures such as reforming zoning laws and expediting the permitting process would increase the supply of housing, easing pressure on house prices and rents.
Investment in resilience against climate related risks would also help grow the economy, the OECD report said.
