This is what Canadians will be worrying about in 2026, RBC says

RBC Economics says Canada proved more resilient than expected in 2025, but the recovery heading into 2026 will be uneven and shaped by forces that go well beyond headline GDP.

In a Jan. 6 report entitled Beyond the forecast: Six themes for Canada’s economy in 2026, a team led by RBC chief economist Frances Donald said fears of a tariff-driven recession last year did not materialize. Canada avoided two consecutive quarters of negative GDP, added jobs and saw household balance sheets improve, helped in part by the fact that nearly 90% of exports to the U.S. remained exempt from tariffs under CUSMA.

Looking ahead, RBC expects further stabilization in 2026, with per-capita GDP likely improving for the first time in three years. Still, Donald said resilience will feel like the wrong word for many Canadians, as the economy becomes more fragmented across regions, income groups and industries.

Regional differences are widening. Trade-sensitive provinces such as Ontario and Quebec face more near-term risk, while Alberta and Saskatchewan remain supported by energy and agriculture.

Trade uncertainty remains a central theme. While Canada enters CUSMA extension talks from a position of relative strength, with inflation near 2%, lower interest rates and an unemployment rate that appears to have peaked, sector-specific tariffs and the risk of renewed protectionism continue to cloud the outlook.

RBC said it is placing less emphasis on day-to-day trade headlines and more on Canada’s longer-term adjustment toward new products, markets and supply chains.

Demographics are another major shift. After years of rapid population growth, immigration policy changes are expected to flatten population growth in 2026. That should ease pressure on housing and rental markets and allow per-capita GDP to recover, but it also coincides with accelerating retirements among baby boomers, tightening labour supply over time.

Regional differences are widening. Trade-sensitive provinces such as Ontario and Quebec face more near-term risk, while Alberta and Saskatchewan remain supported by energy and agriculture. British Columbia, which leans heavily on temporary residents, is already seeing population outflows weigh on housing.

Affordability pressures are easing only slowly. Inflation is moderating, and interest rates have come down, but prices for essentials like food and housing remain far above pre-pandemic levels, hitting lower-income and highly indebted households hardest.

RBC also highlighted a shift in policy leadership. After aggressive rate cuts, the Bank of Canada has signalled the limits of monetary policy, with fiscal policy, particularly defence and infrastructure spending, expected to play a larger role in supporting growth through 2026.

RBC said the groundwork for a longer-term growth pivot is beginning to form, driven by defence investment, major projects and tentative signs of export diversification away from the U.S. While those forces are unlikely to meaningfully lift growth next year, 2026 should offer clearer evidence of whether Canada’s structural transition is gaining traction.

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