Canada faces ‘gradual and bumpy recovery,’ KPMG economic outlook says

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Growth in 2026 is expected to be 'tepid' and 'sub-par' with U.S. President Donald Trump’s trade war weighing on Canada, KMPG's Fall Economic Outlook says.

The Canadian economy is facing a “gradual and bumpy recovery” over the next couple of years, KPMG’s economic outlook said.

The Canadian economy is forecast to grow at one per cent in 2026, with GDP growth ramping up to 1.8 per cent in 2027 and two per cent in 2028, KPMG’s Fall 2026 Economic Outlook said.

“Business is not as good as in the U.S., but our view is that the Canadian economy will see a gradual and bumpy recovery,” the report said.

The KPMG forecast does not account for the possibility of a trade deal with the U.S.

“A thaw in trade tensions looks likely, particularly after the midterms, but we have not baked it in given past head fakes,” it said.

Growth in 2026 is expected to be “tepid” and “sub-par” with U.S. President Donald Trump’s trade war weighing on Canada.

However, continued consumer spending, rising investments in AI-related infrastructure, Canadian “adaptation” to U.S. tariffs and “modest” population growth will mean a resilient Canadian economy, the forecast said.

“While that may not be eye-popping growth, our expectation is that the quality of Canada’s growth will improve,” it said.

So far, however, AI investment has failed to spur economic growth in Canada, analysis shows.

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