Potential output in Canada: 2026 assessment

Growth in potential output is expected to drop from 2.3% in 2025 to 1.2% in 2026 given slowing population growth, US tariffs and trade policy uncertainty. It is then estimated to pick up to an average of 1.5% over 2027–29 as strengthening business and government investment supports trend labour productivity (TLP). Gradual adoption of artificial intelligence is also expected to lift TLP growth over the projection horizon. Relative to Scenario 1 in the April 2025 assessment, growth is revised up in 2025 and revised down over 2026–29.