Deloitte Canada has shaved 20 per cent off its growth forecast for Canada’s economy in 2026, citing an increasingly tough environment for consumers and businesses.
The big four accounting firm predicts soaring energy prices linked to war in the Middle East will weigh on consumer spending, adding to a laundry list of economic challenges and uncertainties stretching from foreign trade to a soft labour market.
That said, chief economist Dawn Desjardins says she is cautiously optimistic these trends will abate toward the back half of the year.
“We’re making a couple of pretty big assumptions. One is that the energy market disruption will moderate over the next few months,” she told Yahoo Finance Canada in an interview.
In a report published on Thursday, Deloitte Canada says real GDP (gross domestic product) is set to grow 1.2 per cent this year, after booking a 1.7 per cent gain in 2025. In January, the firm had called for GDP to rise by 1.5 per cent.
The U.S. crude benchmark WTI fell below US$100 per barrel on Wednesday, as U.S. President Trump reiterated that America’s military campaign in Iran could end within weeks. The conflict has roiled global energy markets since its start in late February, causing a surge in prices for a wide array of commodities, from oil and LNG to fertilizers for farmers.
In Canada, The average price for a litre of regular gasoline has risen 30 per cent since the war started. Fuel industry experts say prices will remain high through the summer travel season.
However, Desjardins says futures contracts for oil show commodity traders are betting on falling prices. For example, the August 2026 contract for West Texas Intermediate (CL=F) crude has a price of about US$78 per barrel. The February 2027 contract has a price of about US$69.
“Prices don’t go back to where they were prior to the crisis that quickly, but nonetheless, we see some easing on energy prices,” Desjardins said.
Deloitte Canada’s outlook for Canada’s economy continues to assume “status-quo” trade with the United States this year.
“This forecast assumes that most Canadian goods exports will continue to avoid tariffs, and that the CUSMA review will pass without major alteration,” the firm wrote in its report published on Thursday.
“We are retaining the industry-specific tariffs in our baseline assumption, which opens the door to a stronger outcome should they be removed.”
The Canada-U.S. trade file took a backseat to energy last month, as Bank of Canada policymakers discussed their latest rate decision. Canada’s central bank has held its overnight interest rate steady at 2.25 per cent since October.