Major Economic Slowdown Ahead for Canada

In a shocking revelation, the Organisation for Economic Co-operation and Development (OECD) has forecasted that Canada will experience one of the most severe economic downturns since the pandemic. North America, particularly countries like the U.S., Canada, and Mexico, is bracing for the most significant impact.

Global Growth Forecast Slashed Again

The OECD has cut its global growth predictions for the second time this year, estimating a decline in global GDP—from 3.3% in 2024 to just 2.9% in 2025 and 2026. This downturn is largely attributed to ongoing trade barriers, tighter financial conditions, and a cloud of uncertainties surrounding business and consumer confidence.

Canada's GDP Growth at Risk

Specifically for Canada, the GDP growth forecast has been downgraded from 1.5% in 2024 to just 1% in 2025 and 1.1% in 2026. Even though Canada was one of the few G20 nations to receive a forecast upgrade in March, the outlook remains bleak as trade disputes and tariff increases weigh heavily on economic prospects.

Trade Tensions and Economic Interlinkages

Since early 2025, escalating trade tensions, particularly with the U.S., have put a damper on Canada's economic potential, given the strong ties between the two nations. A staggering drop in exports to the U.S. is expected, significantly impacting household consumption and business investment.

Dumping in Housing Market and Tariffs' Effects

The housing market isn't expected to rebound anytime soon, remaining largely stagnant through the first half of the year as tariffs imposed on various imports by the Trump administration continue to suppress demand for Canadian exports.

Interest Rate Cuts in Response to Economic Challenges

To counteract the dampening economic climate, the OECD anticipates the Bank of Canada will reduce interest rates by another 50 basis points, bringing it down to 2.25%. However, the effects of these cuts are unlikely to be felt until 2026, raising concerns about prolonged economic hardship.

U.S. Economy Also Facing Major Challenges

The economic forecast for the U.S. is just as grim, with growth expected to plummet from 2.8% in 2024 to a mere 1.6% in 2025. Inflation, driven by rising import prices, is predicted to reach nearly 4% by year-end, effectively stalling any potential cuts to Federal Reserve rates until 2026.

Global Economic Impact of Slowdown

The OECD has warned that this weakened economic outlook will reverberate around the globe, stifling growth, reducing trade, and ultimately damaging job growth. Alvaro Pereira, the OECD’s chief economist, stressed that almost no economy would be spared from this predicted decline. Prepare for tough times ahead!