Canada: Economic and Political Overview
The Canadian economy rebounded in recent years and subsequently continued to grow. GDP growth slowed through 2025, and real GDP fell 0.2% in the fourth quarter. Private consumption remained solid, rising 2.3% over the year, but is weak on a per capita basis. Business capital investment rose just 0.3%, while housing investment continued to decline. Overall, real GDP growth was 1.7% in 2025, the slowest annual pace since the 2020 contraction, as U.S. tariffs and slowing population growth outweighed the support from lower policy rates. Real GDP growth is projected to strengthen in 2025 (+2% as per the IMF), held back by tariffs weighing on exports, before recovering to 1.9% in 2027. Private consumption growth is expected to slow due to lower population growth and a weaker labour market. Nevertheless, on February 1, the U.S. announced 25% tariffs on all imports from Canada, except for oil, which would face a 10% tariff. The tariffs have since taken effect. In the fourth quarter of 2025, three in ten manufacturing businesses reported that U.S. tariffs on Canadian goods had a major negative impact on their business (Statistics Canada).
Concerning public finances, lower revenues and new spending measures have led to larger deficits in the fiscal plan, with the 2023-24 deficit finishing at CAD 61.9 billion, or 2.1% of GDP. The 2024-25 deficit then came in at CAD 36.3 billion (1.2% of GDP), before widening again to CAD 66.9 billion in 2025-26 (Department of Finance Canada). The federal government has introduced several spending measures in recent budgets, prioritizing housing affordability and social spending. In November 2024, two new fiscal incentives were announced: a temporary GST/HST rebate for qualifying goods and a CAD 250 tax rebate to be issued in spring 2025. While increased government spending is only partially offset by efficiency gains and higher capital gains taxes, the overall fiscal stance is expected to remain largely unchanged in 2025-26. The debt-to-GDP ratio was estimated at 113.5% in 2025 by the IMF, with a downward trend expected over the forecast horizon (to 109.5% by 2027). According to official governmental figures, on an annual average basis, the Consumer Price Index (CPI) stood at 2.1% in 2025, down from 2.4% in 2024. Excluding energy, the CPI rose 2.6%, compared with 4.5% the previous year. The IMF projects inflation to hover The IMF projects inflation to hover around 2% this year and in 2026.
The unemployment rate rose from 5% at the start of 2023 to 6.8% by December 2025, easing to 6.7% in February 2026 (Statistics Canada). This increase was mainly due to more unemployed individuals struggling to find work and a growing number of new entrants to the labour force without jobs. Layoffs, however, contributed little to the rise. Although Canadians enjoy a high per capita GDP (estimated at USD 55,765 in 2025 – IMF), 11.0% of the population lives in poverty (2024 Canadian Income Survey).
| Main Indicators | 2025 | 2026 (E) | 2027 (E) | 2028 (E) | 2029 (E) |
| GDP (billions USD) | 2,319.90 | 2,507.34 | 2,640.39 | 2,759.42 | 2,882.32 |
| GDP (Constant Prices, Annual % Change) | 1.7 | 1.5 | 1.9 | 1.7 | 1.7 |
| GDP per Capita (USD) | 55,765 | 60,305 | 63,468 | 66,123 | 68,607 |
| General Government Balance (in % of GDP) | -1.8 | -2.7 | -2.5 | -2.2 | -2.0 |
| General Government Gross Debt (in % of GDP) | 113.5 | 110.7 | 109.5 | 108.1 | 106.7 |
| Inflation Rate (%) | 2.1 | 2.5 | 2.1 | 2.0 | 2.0 |
| Unemployment Rate (% of the Labour Force) | 6.9 | 6.5 | 6.3 | 6.2 | 6.1 |
| Current Account (billions USD) | -21.75 | -5.41 | -9.21 | -11.15 | -8.71 |
| Current Account (in % of GDP) | -0.9 | -0.2 | -0.3 | -0.4 | -0.3 |
Source: IMF – World Economic Outlook Database, Latest data available
The agricultural sector represents 1.8% of Canada's GDP and employs only 1% of the active population (World Bank, latest data available). However, the agricultural system and the food processing industry provide 1 in 8 jobs and account for over CAD 100 billion of the country’s GDP and more than CAD 60 billion in exports. Canada is one of the largest exporters of agricultural products in the world - particularly of wheat - and produces around 10% of the world's GMO harvests. Fishing is another important sector. Canada is also one of the leading producers of minerals, especially nickel, zinc and uranium. According to the latest figures from Agriculture Canada, for the 2026-27 crop year, the production of Canada's main field crops is forecast at 101.5 million tonnes, a 5% year-over-year decrease, which would still be 9% above the previous five-year average. Farm cash receipts for Canadian farmers totalled CAD 101.4 billion in 2025, up 3.4% (+CAD 3.3 billion) on 2024. Receipts for crops (-CAD 871.5 million) and program payments (-CAD 1.1 billion) fell, while receipts for livestock (+CAD 5.3 billion) rose.
The industrial sector contributes 22.5% of the GDP and employs 19% of the labour force. Canada has six strong primary industry sectors: renewable energies (mainly wind, the country is a net exporter of energy); the forestry sector, hydrogen and fuel cells, mines, metals and minerals, fishing, oil and gas. The country is rich in gas and has the 4th largest reserves of oil in the world (being the 4th oil producer in 2024), whose production is concentrated in the western provinces, especially Alberta. According to data from the World Bank, manufacturing accounts for around 9% of the country’s GDP. The latest data from Statistics Canada show that, in 2025, manufacturing sales fell for a second consecutive year, down 0.4% to CAD 848.7 billion after a 1.7% decline in 2024. December alone accounted for CAD 71.0 billion, up 0.6% on November.
The service sector dominates the Canadian economy: it represents 69.6% of the country's GDP and employs over 80% of the active population (the largest employer being the retail sector - which employs about 12% of the country’s workforce alone - and the business-related services sector). The education and health sectors are also pivotal for the country’s economy. The most dynamic sectors in recent years have been telecommunications, tourism, internet and aerospace engineering. Tourism was estimated to account for 1.5% of GDP at the end of Q3/2024, providing nearly 700,000 jobs. Concerning the retail sector, in 2025, retail sales increased 4.0% to CAD 837.2 billion, driven by gains at motor vehicle and parts dealers. In volume terms, sales rose 2.3%.
| Breakdown of Economic Activity By Sector | Agriculture | Industry | Services |
| Employment By Sector (in % of Total Employment) | 1.1 | 18.7 | 80.1 |
| Value Added (in % of GDP) | 1.9 | 27.4 | 64.1 |
| Value Added (Annual % Change) | 6.4 | 1.3 | 1.5 |
Source: World Bank, Latest Available Data. Because of rounding, the sum of the percentages may be smaller/greater than 100%.
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The business rankings model measures the quality or attractiveness of the business environment in a series of countries. It examines separate criteria or categories, covering the political environment, the macroeconomic environment, market opportunities, policy towards free enterprise and competition, policy towards foreign investment, foreign trade and exchange controls, taxes, financing, the labour market and infrastructure.
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