Canada’s Outlook to 2040

Updated: June 15, 2021

Pandemic’s Lingering Effects Will Haunt Canada’s Long-Term Prospects

Canada’s immediate economic prospects have improved since our last long-term update in December 2020, as the rollout of vaccines has boosted business and household confidence. At the same time, labour markets are quickly recovering many of the jobs lost due to the pandemic last year. Overall, we expect real GDP to expand in 2021 and in 2022.

Our long-term forecast remains driven by demographic factors, although some lingering effects from the COVID-19 pandemic could affect economic growth through 2040. The nation’s population will age and also grow more slowly, thus moderating labour force growth.

Contents of the long-term Spring 2021 summary:

  • Economy facing long-term challenges
  • Demographics pose problems for Canada’s economy
  • Potential output hurt by weak labour force growth
  • Will ultra-loose monetary policy lead to inflation?
  • Lower deficits but few fiscal surpluses over the long term
  • Aggregate demand growth to slow


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Key findings

Our long-term outlook envisions modest economic growth, with immigration and better productivity gains helping to counter the impact of the last wave of retiring baby boomers on labour force growth.

Fiscal deficits will persist over the long term, as the federal government will find it challenging to contain spending due to rising health care expenditures and demands from the provinces and cities for funding.

The pandemic has added to the trend toward deglobalization, which emerged during the Trump administration and could persist over the long term to the detriment of Canada’s exporters.

Investment in Canada’s energy patch will be weak over the long term because of the winding down of existing projects, a lack of new projects, and ongoing difficulties in delivering energy to foreign markets.

Issue briefings: December 2020

Canada’s outlooks to 2040

Aggregate demand

Demand Looks a Little Different in Recovery Economy

38-min read  |  Feb 16, 2021


Population Aging Will Continue to Drive Demographic Change

15-min read  |  Feb 2, 2021


Growth Expected, but for How Long?

26-min read  |  Feb 2, 2021

Fiscal policy

Digging Out of the COVID-19 Fiscal Hole

21-min read  |  Feb 2, 2021

Labour markets

An Aging Workforce Will Leave Labour Market Wanting

20-min read  |  Mar 25, 2021

Monetary policy

A Rush to Manage Vulnerability

20-min read  |  Feb 2, 2021

Potential output

Battered Economy Running Below Potential

12-min read  |  Feb 2, 2021

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