Canada's economy 'Walking on a Tightrope,' Deloitte report warns of looming downturn
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Growth slows, investment stalls
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Tariff risks threaten trade stability
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Strategic policy required to avert crisis
Reinforcing trade agreements such as CUSMA and exploring new bilateral pacts with Asian and European markets.
Targeted fiscal stimulus to support key sectors and boost public infrastructure investment.
Workforce development policies to address labor shortages in technology, health care, and skilled trades.
Warning amid political transition
Conclusion: a defining year ahead
In a stark warning issued this week, global consultancy giant Deloitte has forecast a potential economic downturn in Canada, citing slow GDP growth, declining private investment, and mounting trade-related risks. The report, titled 'Walking on a Tightrope: Canada's Economic Outlook 2025,' suggests the country is at a pivotal economic moment that could shape its fiscal health for years to come.Also read: Out of the frying pan and into the fire: Carney stares at shrinking GDP According to Deloitte's analysis, Canada's GDP growth is expected to hover just above 1% in 2025—well below the historical average. A mix of high interest rates, inflationary pressure, and global supply chain uncertainties have slowed consumer demand and reduced investor confidence.'Private sector investment, especially in manufacturing and infrastructure, has noticeably declined,' the report noted. 'With elevated borrowing costs and policy ambiguity, many businesses are choosing to delay or downscale major capital projects.'The report also indicates a decrease in foreign direct investment, partially driven by geopolitical tensions and uncertainty around North American trade policy.A central concern raised by Deloitte is the increasing threat of new U.S. tariffs, especially in the wake of political developments south of the border. While some Canadian sectors—such as auto parts compliant with CUSMA (Canada–United States–Mexico Agreement)—have received tariff exemptions, the broader threat of protectionism remains.'Maintaining and expanding these tariff exemptions will be critical to preserving Canada's trade competitiveness,' said Deloitte's Chief Economist Craig Alexander. 'Any escalation could deeply impact Canada's export-driven industries, including automotive, agriculture, and technology.'Also read: How Canada's 2025 election could shape its economic future The report urges Canadian policymakers to act quickly and decisively to prevent a deeper economic contraction. Recommendations include:The consultancy also highlights the need for innovation-driven economic models to ensure long-term resilience.The Deloitte report arrives just weeks after Canada's 2025 federal election, which saw former Bank of Canada governor Mark Carney become Prime Minister. His campaign heavily emphasized economic stability, industrial growth, and reducing U.S. dependency—areas where the Deloitte report sees both challenges and opportunity.Carney's leadership team has not yet responded to the findings, but experts believe the report could influence upcoming fiscal policy decisions, including budget allocations and trade strategy realignments.While Canada is not in a recession yet, Deloitte's warning underscores the fragility of the current economic landscape. Whether the country can maintain its footing on this tightrope will depend on swift, data-driven decisions at the federal and provincial levels.
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