Intelligent Investment
Canada Resilient Heading Into 2026 But Risks Remain
Canada Monthly Market Commentary - December 2025
December 18, 2025 2 Minute Read
Heading into 2026, the Canadian and global economy has been resilient in the face of tariffs and uncertainty. In the OECD’s latest global economic outlook report, the organization noted that supportive macroeconomic policies, improved financial conditions and rising AI investments has helped cushion headwinds from trade and uncertainty. While stronger than expected resilience led to slight upward revisions to the outlook for some major economies, the OECD also cautions that there remains substantial risks in 2026. These include the potential resurgence of trade tensions or a stock market correction that could significantly impact growth.
Canada’s economic resilience has in large part been due to the continuation of CUSMA that has sheltered much of Canadian trade from U.S. tariffs. So while the Canadian economy did slow in 2025, it was broadly contained. However, the ever looming negotiations to the free trade agreement next year pose a significant risk to Canada’s outlook. Another aspect of Canada’s resilience also comes from data revisions by Statistics Canada which reveal the economy was actually stronger heading into the trade war than previously thought. Overall, the major Canadian bank economist groups forecast the economy to have grown by 1.7% in 2025 and then lower to 1.4% in 2026 given slower economic momentum.
Interest rates are expected to stay on hold throughout 2026 as the Bank of Canada currently has little compelling reasons to make any further cuts. The central bank views the current policy interest rate of 2.25% to be “at about the right level” to keep inflation contained while also providing some support to the economy. But given the risks to the economy remains high, the Bank of Canada says they will also be prepared to respond if the outlook changes.
With uncertainty likely to continue to prevail in 2026, this presents an opportunity for Canadian commercial real estate according to CBRE Canada Chairman Paul Morassutti’s real estate outlook. Demand will continue for investments and markets that reduce overall volatility and premiums will be paid for Canadian qualities of safety, stability and predictability. With capital markets healthy and deal flow improving, the Canadian real estate investment market is well set up for a robust recovery in 2026.
Economic Highlights:
- GDP growth for Q3 2025 was 2.6% annualized with advanced estimates indicating a 0.3% monthly decline in October 2025.
- Headline inflation held flat at 2.2% in November 2025 while core measures CPI-Median and CPI-Trim both cooled to 2.8%.
- Employment rose by 53,600 jobs in November and the unemployment rate decreased to 6.5%.
Viewpoints:
- World economy shows surprising tariff resilience, OECD says
- Economy was on stronger footing heading into trade war, Statscan revisions show
- Bank of Canada expected to hold interest rate steady through 2026 as inflation cools
- Global Economic Uncertainty Could Benefit Canadian Real Estate in 2026
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