Canada’s PBO slashes economic forecasts, warns debt will rise

The Parliamentary Budget Office is trimming its outlook for economic growth for this year and next amid new U.S. tariffs and Canadian countermeasures.

The federal budget watchdog says it now projects real gross domestic product growth of 0.9 per cent for this year and 1.5 per cent in 2027.

The forecast is down from an estimate in June for growth of 1.1 per cent and 1.6 per cent, respectively.

Trade talks between Canada and the U.S. broke down at the end of August followed by a new round of U.S. tariffs and Canadian counter-tariffs.

The PBO says it also now projects a budgetary deficit of $63.3 billion for the 2026-27 fiscal year which will peak at $70.2 billion in 2027-28.

It says, relative to its June outlook, the deficits are $3 billion higher per year on average over 2026‑27 to 2030‑31, as new spending measures more than offset stronger revenues.