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OTTAWA \u2014 The Parliamentary Budget Office has trimmed its outlook for economic growth for this year and next amid new U.S. tariffs and Canadian countermeasures.<\/p>\n
In a revised outlook on Tuesday, the federal budget watchdog said it now projects real gross domestic product growth of 0.9 per cent for this year and 1.5 per cent in 2027.<\/p>\n
The forecast is down from estimated growth of 1.1 per cent and 1.6 per cent, respectively, issued in June.\u00a0<\/p>\n
\u201cCanada faces a more challenging economic and fiscal outlook than we projected in June,\u201d Annette Ryan, parliamentary budget officer, said in a news release.\u00a0<\/p>\n
\u201cAdditional trade measures and ongoing uncertainty are weighing on growth in real output \u2013 what we produce as a country.\u201d<\/p>\n
Trade talks between Canada and the U.S. broke down at the end of August followed by a new round of U.S. tariffs and Canadian counter-tariffs.\u00a0<\/p>\n
The PBO said it also now projects a budgetary deficit of $63.3 billion for the 2026-27 fiscal year, which will peak at $70.2 billion in 2027-28.<\/p>\n
Relative to its June outlook, the deficits are $3 billion higher per year on average over 2026\u201127 to 2030\u201131, as new spending measures more than offset stronger revenues, the watchdog said.\u00a0<\/p>\n
\u201cThe PBO continues to maintain that debt-to-GDP ratio is an important benchmark for measuring fiscal health,\u201d Ryan said. \u201cIt will rise steadily over the five-year horizon.\u201d<\/p>\n
She added: \u201cOver the longer term, Canada\u2019s economic and fiscal outlook will depend heavily on whether recent capital budget investments can translate into stronger productivity, economic capacity and prosperity.\u201d\u00a0<\/p>\n
Meanwhile, the PBO assumes the Bank of Canada will start raising its policy rate in early 2027 \u201cto keep inflation expectations anchored,\u201d reaching 2.75 per cent by midyear.\u00a0<\/p>\n
On inflation, the watchdog expects higher energy prices will keep the annual inflation rate elevated in 2026, averaging 2.8 per cent, before easing to 2.4 per cent in 2027.<\/p>\n
—<\/p>\n
This report by The Canadian Press was first published Oct. 20, 2026.<\/p>\n
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