In its latest economic survey, the OECD projects Canada’s GDP will grow by just 1 percent this year, with a contraction in the second quarter and flat growth in the latter half of the year.
This tepid performance is largely attributed to escalating trade tensions and tariffs, particularly from the United States, which have dampened exports and strained key industries like manufacturing and agriculture.
The labor market reflects these challenges. Statistics Canada reports that the national unemployment rate rose to 6.9 percent in April, up from 6.7 percent in March, marking the highest level since November 2023.
The OECD anticipates this trend will continue, forecasting unemployment to reach 7.1 percent by year’s end and 7.3 percent in 2026.
Prime Minister Mark Carney, addressing the Liberal caucus, acknowledged the nation’s “weak productivity,” stating it “is making life less affordable for Canadians.” He emphasized the need to transform the Canadian economy and build new partnerships with “reliable allies.” The OECD underscores the urgency of these reforms, highlighting that Canada’s per capita GDP lags behind its peers, notably the United States. The report attributes this to rapid population growth outpacing productivity-enhancing investments and a labor market increasingly composed of low-skilled, non-permanent residents.To counter these headwinds, the OECD recommends reducing interprovincial trade barriers and improving labor mobility across provinces. Such measures could bolster productivity and help Canada capitalize on markets beyond the US.
