Canadian economic forecast sees a gradual recovery, with investment and energy risks in focus

Canada is heading towards a gradual and uneven recovery rather than a quick return to strong growth, according to KPMG Canada's fall economic outlook. The November 11 forecast projects growth of 1.0 percent in 2026, 1.8 percent in 2027 and 2.0 percent in 2028. It rests on information available up to November 6, so later trade announcements and market developments should not be mistaken for assumptions already built into the model.

The forecast expects household spending, rising investment, adaptation to tariffs and somewhat faster population growth to support activity. Per-person GDP growth is projected at 0.5 percent this year and about 1 percent in each of the following two years. Output would still be around 1 percent below its pre-2025 trend. That distinction matters: an improvement in growth does not necessarily recover all the activity lost relative to the earlier path.

Data-centre plans offer upside, but plans are not construction

Technology, energy infrastructure and major projects are central to the investment argument. The forecast includes about C$30 billion of data-centre investment over two years, while prospective plans total more than five times that amount. The larger number is not money already committed or spent. Alberta and Saskatchewan are expected to lead regional growth, with Ontario recovering in 2027 and more subdued conditions in Quebec and British Columbia. Federal budget measures are estimated to add 0.2 percentage points to 2027 growth, partly offset by provincial restraint.

Inflation is the major uncertainty. The outlook assumes benchmark US oil falls from roughly US$95 a barrel in the final quarter of 2026 towards US$80 by the end of 2027. On that basis, average Canadian inflation would be 2.8 percent in 2026, 2.1 percent in 2027 and 1.6 percent in 2028. Prolonged high energy prices could upset that path. KPMG expects the Bank of Canada could raise its policy rate to 2.75 percent as early as December if oil remains expensive; that is the forecaster's conditional view, not a commitment by the central bank.

Trade relief would improve the outlook, while market stress could weaken it

A substantive US-Canada trade agreement is an upside risk rather than part of the baseline, because earlier negotiations have produced false starts. The outlook also warns that disappointing AI earnings, debt-market stress, another energy shock or a European debt crisis could spread into Canada. Its near-term currency range of C$1.40-C$1.42 per US dollar and later appreciation towards C$1.38-C$1.39 are likewise projections. The useful message is the dependence on investment and easing cost pressures, not certainty about any single growth, exchange-rate or interest-rate number.