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Ottawa | Arab Canada News

Economists speculate that the Canadian economy has effectively entered the early stages of a recession, amid declining exports and rising unemployment rates, alongside escalating repercussions from the trade dispute with the United States.

According to a survey conducted by Bloomberg involving 34 economists from May 16 to 21, Canada’s GDP is projected to contract by 1% year-on-year in the second quarter of this year, and by 0.1% in the third quarter, placing the country within the scope of a “technical recession,” defined as an economic contraction for two consecutive quarters.

Declining exports and increasing unemployment

Canadian exports are expected to decline by 7.4% during the current quarter, after threats from President Donald Trump to impose tariffs prompted U.S. importers to accelerate their shipments at the beginning of the year. Despite this decline, experts anticipate a slight recovery in exports later this year.

The trade dispute has also cast a shadow over the labor market and household spending, with unemployment expected to rise to 7.2% in the second half of the year, before starting to decline during 2026. It is also anticipated that the inflation rate will remain above the Bank of Canada’s target, at 2.1% in the third quarter and 2.2% in the last quarter of 2025.

Bank of Canada in a difficult position

These indicators place the Bank of Canada in a complex equation, as Bloomberg data indicates a probability of less than 30% for any adjustment to the interest rate at the bank’s meeting scheduled for June.

Bank of Canada Governor Tiff Macklem said, “The more we can reduce uncertainty, the better we can focus on the future in our monetary policy decisions.”

Slowdown in the real estate market and anticipation of a trade agreement

The prevailing sense of anticipation among consumers and businesses regarding the future relationship with Washington has led to a significant slowdown in the housing market, where sales and prices have fallen. It is also expected that the pace of housing construction in the second half of the year will be weaker than in the second quarter.

As Canada seeks to reach a new trade agreement with the United States, Macklem said, “If we get that clarity, we can return to growth. However, if things get worse, the consequences will be more severe.”

Canadian Prime Minister Mark Carney is expected to meet with U.S. President Donald Trump during the G7 summit in Alberta next month, marking Trump’s first visit to Canada since his return to the White House. However, Carney warned that “the era of deep integration between the two countries is gone forever.”

Growth forecasts for the next two years

Despite the challenges, forecasts still indicate limited GDP growth of 1.2% in 2025 and 1% in 2026, figures that align with previous surveys conducted by Bloomberg.