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Economic Viewpoint

Canadian Economic and Fiscal Implications of Venezuela’s Regime Shift

January 21, 2026
Randall Bartlett
Deputy Chief Economist

Highlights

  • Building on our prior analysis External link. of the global economic and oil market implications of Venezuela’s regime shift, here we drill down into the possible economic and fiscal impacts for Canada.
  • Capital spending in Canada’s energy sector remains an important driver of overall business investment. But this time should be different than in 2014. While the newfound uncertainty around the oil price outlook will likely further discourage planned investment, the broader economic impact of lower oil prices is expected to be more of a medium-term risk.
  • So, with the Venezuelan regime shift likely leading to more gradual and regionally focused oil price implications than in the past, the Canadian economic impact is also likely to be modest. Nominal GDP could be as much as 1% lower in 2027 in the worst-case scenario than in our December 2025 Economic and Financial Outlook (EFO). However, the impact of a lower price for Western Canadian Select (WCS) should be felt more in Alberta than nationally.
  • Sticking with Alberta, the news on the fiscal front is suggestive of some headwinds. The deficit could deteriorate by $6.7B in the 2026–27 fiscal year (FY27) and $5.2B in FY28 relative to Alberta’s 2025 budget External link. if our new WCS baseline price forecast proves correct. If the lowest WCS price scenario comes to fruition, the deficit could widen by $9.2B and $10B in FY27 and FY28, respectively. That said, Alberta started FY26 in the strongest fiscal position of Canadian provinces, with among the smallest expected deficits and unquestionably the lowest net debt as a share of GDP of the group.
  • The federal fiscal story is a little more complicated. Historical data revisions and a better economic outlook improved its fiscal position even before any upcoming deterioration in oil prices weigh on the economic and financial outlook. As such, even under the worst-case oil price scenario, the Government of Canada’s deficits over the next couple of years may come in smaller than those presented in Budget 2025 External link..
NOTE TO READERS: The letters k, M and B are used in texts, graphs and tables to refer to thousands, millions and billions respectively. IMPORTANT: This document is based on public information and may under no circumstances be used or construed as a commitment by Desjardins Group. While the information provided has been determined on the basis of data obtained from sources that are deemed to be reliable, Desjardins Group in no way warrants that the information is accurate or complete. The document is provided solely for information purposes and does not constitute an offer or solicitation for purchase or sale. Desjardins Group takes no responsibility for the consequences of any decision whatsoever made on the basis of the data contained herein and does not hereby undertake to provide any advice, notably in the area of investment services. Data on prices and margins is provided for information purposes and may be modified at any time based on such factors as market conditions. The past performances and projections expressed herein are no guarantee of future performance. Unless otherwise indicated, the opinions and forecasts contained herein are those of the document’s authors and do not represent the opinions of any other person or the official position of Desjardins Group.