Economy

IMF cuts Canada's 2026 growth forecast to 1.1% as energy shock and trade uncertainty bite

The fund's October World Economic Outlook trims Canada's outlook by 0.4 points from April, sees inflation at 2.8% this year and assumes oil averages US$95.74.

By John Wilson · October 13, 2026

The International Monetary Fund lowered its forecast for the Canadian economy on Tuesday, October 13. In its latest World Economic Outlook, titled "Resilience Under Strain, Urgent Choices," the IMF now expects Canada's economy to grow 1.1% in 2026, down from 1.9% in 2025 and 0.4 percentage points below the projection it published in April.

The fund points to two culprits: an energy shock tied to the war in the Middle East, and continuing trade uncertainty.

The forecasts

The IMF's baseline assumes oil averages US$95.74 a barrel in 2026, up from US$67.74 in 2025.

Canada GDP growth: 1.1% in 2026, recovering to 1.7% in 2027
Canada inflation: 2.8% in 2026, up from 2.1% in 2025, easing to 2.4% in 2027
Canada unemployment: edging down from 6.9% in 2025 to 6.5% in 2026
Global growth: 3.1% in 2026, up 0.1 point from July, and 3.4% in 2027
Advanced economies: 2.1% in 2026, slowing to 1.8% in 2027
Global headline inflation: 4.7% in 2026, easing to 4.1% in 2027

Why Canada is lagging

Globally, the picture is one of reallocation rather than collapse. Spending on artificial intelligence is propping up growth in the United States and elsewhere, while energy-importing and lower-income economies absorb the brunt of higher fuel costs.

Canada sits in an awkward middle. Better prices for its commodity exports and supportive policies partly cushion the blow, according to the fund, but tariffs and trade uncertainty are weighing on business investment and manufacturing. The forecast lands days after Statistics Canada reported a second straight month of job losses, with 68,000 positions shed in September.

The IMF also noted that Canada's growth is set to improve on a per-capita basis, a measure that had struggled over the past decade, partly because population growth has slowed sharply.

Risks and the other side

The fund lists further conflict escalation, renewed trade tensions, fiscal vulnerabilities and a sharp reassessment of AI-driven profits as the main downside risks. On the upside, a sustained easing of geopolitical and trade tensions, or faster productivity gains from AI, could deliver stronger growth than forecast.

Forecasts of this kind are revised often; the fund's Canadian number alone has fallen 0.4 points since April. "The task ahead is to move from coping to rebuilding," IMF economic counsellor Silvana Tenreyro wrote in the report's foreword.

What it means for Canadian households

An economy growing around 1% with inflation near 2.8% means real incomes are under pressure. The IMF also found that during cost-of-living shocks, lower-income households face higher effective inflation because essentials take up more of their budgets.

For savers, the practical takeaways are familiar: keep cash savings in accounts or GICs that at least try to keep pace with inflation, and keep long-term portfolios diversified across regions and asset classes rather than betting on any single forecast. This is general information, not personalized advice.

Sources

General news and information, not individualized financial advice. Figures reflect the publication date.