# PBO Projects Canada's GDP Growth Will Slow to 0.9 Percent in 2026 New U.S. tariff measures and elevated energy prices weigh heavily on Canada's economic outlook. - **Source:** [Financial Post - Top Stories](https://financialpost.com/) - **Published:** 2026-10-20 - **Topic:** [Finance](https://brifing.si/c/finance) - **Original article:** - **On Brifing:** https://brifing.si/s/46cbdcad-86fa-43fd-9969-bcc30e83fcbe ## Economic Growth Forecast Downgrade The Office of the Parliamentary Budget Officer projects Canada's real GDP growth will slow to 0.9 percent in 2026 and 1.5 percent in 2027. These figures represent a downward revision from the 1.1 percent and 1.6 percent estimates published in June, reflecting increased pressure from U.S. trade tariffs and ongoing economic uncertainty. ## Impact of Section 338 Tariffs New U.S. Section 338 tariffs impose 50 percent levies on $27.6-billion worth of Canadian goods. Affected sectors include alcohol, dairy, autos, electronics, chemicals, and plastics. Businesses are expected to adapt to these trade barriers by 2028, at which point investment and economic growth are projected to recover as tariff-related uncertainty fades. ## Nominal GDP and Price Pressures Nominal GDP is projected to grow by 5.6 percent in 2026 and 3.4 percent in 2027. Officials clarify that this growth reflects rising prices rather than increased productivity. Elevated commodity prices, particularly in the energy sector, have contributed to these figures, though this impact is expected to moderate significantly after the year 2027. ## Inflation and Interest Rate Outlook Higher energy prices are expected to keep inflation at 2.8 percent by the end of 2026, easing to 2.4 percent by late 2027. Consequently, the Bank of Canada is expected to maintain rates at 2.25 percent before potentially hiking to 2.75 percent by mid-2027 to ensure inflation expectations remain anchored to the target. ## Labour Market Challenges Persist The unemployment rate is projected to rise to 6.6 percent by the end of 2026, remaining elevated through 2027 before declining to 5.9 percent by 2031. Recent data shows the economy lost 68,000 jobs in September, pushing the unemployment rate to 6.5 percent as population growth slows and the total labour force shrinks. ## Global Energy Price Volatility Brent crude recently traded at approximately US$108.4 per barrel, while West Texas Intermediate hovered around US$97.44. These prices remain significantly higher than the US$75 per barrel anticipated by officials in July. Ongoing conflicts in the Middle East continue to drive up costs for gasoline, diesel, and essential heating oil supplies. ## Central Bank Policy Considerations Bank of Canada Governor Tiff Macklem noted that the inflation outlook will likely be revised upward in the upcoming October 28 Monetary Policy Report. While the central bank has not confirmed immediate rate hikes, officials are monitoring whether inflation will return to the two percent target independently or require further policy intervention. ## Long-term Economic Adjustment Path The Canadian economy is expected to return to its full productive capacity by 2030. Actual outcomes remain contingent on global commodity market developments, international economic growth, and the speed of business adjustments to trade policies. The current projections assume a status quo regarding existing tariff measures and ongoing geopolitical trade tensions. ## Sources covering this story - https://financialpost.com/news/economy/pbo-projects-canadas-gdp-growth-slow-in-2026 — --- _Summary written by Brifing from the original reporting. Copyright in the original article belongs to its publisher; read the full piece at the link above._