A new forecast by Deloitte Canada suggests the country will avoid a technical recession this year as the economy is expected to grow in the third quarter before posting stronger gains in 2026.
Statistics Canada reported last month that real gross domestic product fell 1.6 per cent on an annualized basis in the second quarter as the economy saw a drop-off in exports and business investment.
However, Deloitte’s fall forecast predicts the Canadian economy will avoid two consecutive quarters of contraction and post annualized growth of 1.2 per cent in the third quarter followed by 1.5 per cent in the final quarter of 2025.
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The report says sector specific tariffs imposed by the U.S. will continue to hurt the country’s manufacturing industries, but it noted that Canada faces low overall average U.S. tariffs compared to other countries and this is minimizing the economic damage.
Deloitte Canada chief economist Dawn Desjardins also predicts the Bank of Canada will cut its policy interest rate to 2.25 per cent by the end of the year, creating more favourable financing conditions.
Overall, the report expects the Canadian economy to grow 1.3 per cent this year followed by growth of 1.7 per cent in 2026.
This report by The Canadian Press was first published Sept. 29, 2025.
