Provincial Outlook: Canada’s Provinces Are Facing a “Productivity Emergency” Too

We still anticipate that Canada’s oil-producing provinces will fare the best in the coming quarters. By contrast, more interest rate-sensitive provinces will feel more pain, as the full effects of already completed monetary tightening result in slower economic growth.

Higher levels of operating and infrastructure spending forecast in this year’s provincial and federal budgets should offer a modest incremental boost to economic growth rates this year.

We expect Ottawa’s planned reductions in the non‑permanent resident (NPR) population to weigh down national and provincial growth in 2025 and 2026. Our analysis suggests Ontario and BC are the most vulnerable to the policy change.

But perhaps the biggest takeaway from the latest GDP data is that the “productivity emergency” recently raised by the Bank of Canada is a nationwide crisis. Output per capita fell in every province last year, which was the broadest-based standard of living decline in recorded Canadian history other than during the pandemic. So while the weak economic growth rates we’re projecting may not be persistent or severe enough to qualify as a “recession,” for many Canadians the next few quarters may feel like one.