Canada’s economy is expected to regain momentum later this year and continue strengthening into 2027, supported by improving hiring activity, a recovery in business confidence and stronger investment, according to Signal49 Research.
In its latest provincial five-year outlook, the Ottawa-based think tank, formerly known as the Conference Board of Canada, said the anticipated rebound would be underpinned by increased public and private investment, steady consumer spending and an assumption that Canada-U.S. trade tensions will ease.
However, the outlook remains far from certain. Escalating tariffs, the continuing conflict in the Middle East and mounting demographic pressures are creating significant uncertainty and headwinds for the Canadian economy, the independent research organization said.
“Business investment has been really weak in Canada recently, but we’re seeing some signs that that could be turning around,” said Richard Forbes, principal economist at Signal49 Research.
Forbes described the development as encouraging, while stressing that investment is recovering from a very low level.
“It is coming from a very low level but it’s starting to turn the corner, so it is optimistic,” he said.
The trade war, however, remains one of the most significant threats to Canada’s economic growth prospects.
“The longer it gets drawn out, the more it escalates, the worse the outlook is going to be for Canada,” Forbes said.
Provinces face sharply different economic conditions
While Canada’s overall economic picture is expected to improve in the second half of the year, the outlook varies considerably across the country. Different provinces are being affected in very different ways by the economic headwinds and tailwinds, according to Signal49 Research.
Newfoundland and Labrador and Ontario stand out in particular, sitting at opposite ends of the provincial economic outlook.
Newfoundland and Labrador is expected to lead Canada’s economic expansion for a second consecutive year. Higher crude oil prices and offshore oil projects are expected to remain the main drivers of growth.
The province’s economy is forecast to expand by 3.7 per cent in 2026. Over the longer term, however, demographic pressures are expected to limit its growth potential.
“Oil production has really been the driver of Newfoundland and Labrador this year,” Forbes said.
He added that the province remains one of Canada’s weakest performers over the longer term because of its older population and difficulties attracting migrants.
Ontario, meanwhile, is expected to record the country’s weakest economic growth this year, with its economy forecast to expand by just 0.2 per cent.
Canada’s most populous province has been among the hardest hit by U.S. tariffs, particularly because of its significant manufacturing base.
“The auto sector has been continually targeted since early 2025 and almost 100 per cent of Canadian auto production is in Ontario,” Forbes said.
Quebec faces tariff exposure and slower population growth
Quebec is also dealing with considerable economic challenges. The province has broad exposure to tariffs and is experiencing slow population growth.
Despite those pressures, Signal49 Research expects Quebec’s economy to grow by 0.7 per cent in 2026, helped by an anticipated recovery in exports, employment and investment.
B.C. benefits from LNG and Asian trade prospects
British Columbia faces a different set of pressures. Population growth is expected to be constrained by limited housing supply and a high cost of living, according to the think tank.
At the same time, LNG developments, strong trade prospects with Asia and the province’s relative insulation from the U.S. trade dispute are expected to provide support.
B.C.’s economy is forecast to grow by 1.4 per cent in 2026.
Alberta looks to resources and artificial intelligence
Alberta’s economic outlook is comparatively stronger, with its resource sector and an expanding artificial intelligence industry expected to support growth through 2026 and 2027.
Signal49 Research expects the province to generate strong job creation and robust business investment. Its economy is forecast to grow by 1.5 per cent in 2026, with Alberta expected to remain one of Canada’s strongest-performing provinces over the coming decade.
For Canada as a whole, the expected rebound provides some cause for optimism. But the outlook remains closely tied to the evolution of the trade war, investment trends, demographic pressures and wider geopolitical developments.
