The production line at the Honda manufacturing plant in Alliston, Ont., in April, 2023.Cole Burston/The Canadian Press
To help make sense of 2025, The Globe and Mail asked dozens of experts, including economists, investors, academics and business leaders, to each choose a chart they think will be important to watch this year.
Bigger but not better
Livio Di Matteo, professor of economics, Lakehead University
It’s only with the fullness of time that economic decline becomes apparent. Since the late 1970s, Canada’s real per capita gross domestic product has declined from nearly 90 per cent that of the United States to barely 70 per cent now. Despite this, Canada has surprisingly been growing its employment and its population faster than the U.S.
This is a major conundrum, because it signals that our productivity problem is more ingrained than anyone can possibly imagine. Having relatively more people and more workers producing ever less per person relative to our major trade partner and economic competitor is a recipe for stagnation. Canada is increasing the size of its overall economy as measured by total output, total employment and total population, but not its standard of living as measured by real output per person.
Fundamentally, this situation of extensive rather than intensive growth continues because we’re operating a relatively uncompetitive economy that’s integrated with a much more competitive one. In the short term, our export-dependent economy competes via the depreciation of our dollar. But, honestly, how low can we go?
Deep-freeze decade
David Williams, vice-president of policy, Business Council of British Columbia
Adjusted for population, Canada’s economy has barely grown in a decade. Real gross domestic product per capita is less than 1 per cent higher than in 2014. Government spending, funded by higher taxes and borrowing, has ballooned, while private-sector activity has languished. Per-person government spending has grown by 11 per cent since 2014, nearly three times more than per-person household spending (4 per cent). Using per-person figures again, exports have shrunk by 3 per cent, and capital investment in businesses and residential structures has collapsed by 23 per cent and 14 per cent, respectively. Over the past decade, Canada’s GDP-per-capita growth has been the second-lowest among 38 Organisation for Economic Co-operation and Development countries. This is not temporary. The OECD projects Canada will have the lowest GDP-per-capita growth of any advanced country over the four decades to 2060.
Ontario, poor to discover
Ben Eisen and Joel Emes, policy analysts, Fraser Institute
In the political realm, there is much debate over whether Canada is broken. If we consider economics at the provincial level, one point seems beyond dispute: Ontario’s economy is broken and has been for a long time.
Throughout the 1980s and 1990s, Ontario’s real annual per-capita economic growth was 1.65 per cent. Then the province’s economy broke down. Since 2001, Ontario’s annual economic growth rate has been 0.58 per cent. Economic growth also slowed in the rest of Canada across these two periods, but the slowdown was not nearly as substantial. As a result, Ontario has gone from being meaningfully richer than the rest of Canada in 2000 to meaningfully poorer today.
Ontario’s gross domestic product per capita today is $71,659 (in 2023 dollars). Our chart shows that since 2000, if Ontario maintained the real per-capita growth rate of the 1980s and 1990s, that figure would be $90,603. In other words, the province would be 26.4-per-cent richer now if its economy hadn’t broken in the 2000s.
Ontario should aspire to be one of the richest places on Earth. This is less true today than 25 years ago, and its slow-growth economy remains broken.
Easy flow, easy go
Danielle Goldfarb, advisor on trade, economics and real-time data at the Centre for International Governance Innovation and the Asia Pacific Foundation of Canada
It’s now increasingly clear that Donald Trump’s threat of a 25-per-cent tariff on U.S. imports from Canada isn’t simply a negotiating gambit. He’s serious.
One of the main goals is for companies to move operations to Trump-supporting states, and the need to avoid “high-enough” tariffs will make them do that. In the immediate term, Canada-U.S. trade may grow as companies stockpile inventory to avoid tariffs. Longer term, why locate in Canada to serve the much larger U.S. market if you have to pay such high tariffs? Even if the tariffs are temporary or reduced, the uncertainty alone makes it less attractive to invest in Canada.
Canada attracted more foreign direct investment in the first half of 2024 relative to the second half of 2023, which was also an increase from the previous six months. Now we need to watch for a possible reversal in 2025 and beyond.
It takes time to shift locations, and there are many factors at play. Policy makers here could also take actions to blunt the impact, such as getting rid of trade barriers within Canada. But if foreign direct investment drops sharply, it would significantly challenge Canada’s ability to maintain its living standards.
Slow going
Tony Stillo, director of Canada economics, Oxford Economics
We think slow economic growth will likely continue in Canada in 2025. While uncertain policy shocks in Canada and the U.S. threaten to reshape the economic landscape, gross domestic product per capita here should begin to improve after declining for more than two years.
The Canadian economy will increasingly benefit from lower interest rates, looser mortgage lending rules and improving global demand. But prospects for growth will continue to be weighed down by lingering imbalances. Topping the list are elevated household debt burdens, underinvestment by the private sector and sluggish productivity growth.
Key policy shifts will also prove pivotal in the coming year. Canada’s new curbs on immigration – an unprecedented policy U-turn – will shrink the population and significantly dampen the economy.
Crucially, a likely Conservative win in the upcoming federal election would usher in a sea change to Canada’s economic and fiscal agenda. And if Donald Trump follows through on his threat to impose a 25-per-cent tariff on all Canadian imports on day one of his presidency, the economy would fall into recession in 2025.
Double-edged sword
David-Alexandre Brassard, chief economist, CPA Canada
If the government is successful in bringing down non-permanent immigration, Canada might very well see little to no population growth in 2025 and 2026. This could alleviate housing pressures and allow job creation to catch up with labour supply.
However, stagnant population growth could dent the country’s current economic growth model, which has relied almost exclusively on adding workers. Labour productivity and the average number of hours worked have both been stable lately. Lifting the economic constraint of high interest rates is one thing, but we need to figure out how to reconnect with labour productivity growth.