Canadian Prime Minister Mark Carney has pledged to transform the country into the strongest economy among the G7 nations, making economic revival a key priority of his government. Over the past year, Carney has travelled extensively abroad to attract foreign investment and promote Canada as a preferred destination for business. However, despite these efforts, the country continues to grapple with several economic challenges that are affecting households and businesses alike.
Canada’s economy has recently entered what economists describe as a technical recession after recording two consecutive quarters of declining gross domestic product (GDP) in late 2025 and early 2026. While the downturn has raised concerns, experts believe the contraction has been relatively mild and is unlikely to develop into a prolonged recession. The International Monetary Fund has projected Canada’s economy to expand by 1.6% this year, placing it behind the United States but ahead of several European members of the G7. The Organisation for Economic Co-operation and Development expects growth to improve slightly to 1.7% in 2027 as the economy gradually recovers from disruptions caused by US tariffs and global supply chain uncertainties.
The federal government maintains that it is responding to global economic instability through measures aimed at boosting exports, creating jobs and improving productivity. Nevertheless, economists caution that while the recession may be limited, the economy remains weak and requires sustained policy attention.
Rising living costs continue to be the biggest concern for Canadians. A recent survey found that a majority of respondents ranked the cost of living above housing affordability, crime and the impact of US tariffs. Inflation rose to 3.2% in May from 2.8% in April, mainly due to higher fuel prices linked to geopolitical tensions in the Middle East. Although current inflation is well below the peaks recorded after the Covid-19 pandemic, many households continue to struggle with increasing grocery and energy bills.
Housing remains another major challenge, particularly for younger Canadians. Rapidly rising property prices have significantly increased the wealth of existing homeowners while making home ownership increasingly unattainable for first-time buyers. Canada also has the highest household debt among G7 countries, largely driven by mortgage borrowing. While many homeowners have benefited from rising property values, renters and lower-income households continue to face considerable financial pressure.
The labour market also reflects growing inequality. Canada’s overall unemployment rate stood at 6.6% in May, but unemployment among young people remained significantly higher at 13.4%, despite showing a slight improvement from previous months. Experts argue that younger Canadians and many newcomers are bearing the brunt of the country’s economic slowdown, facing greater difficulty in securing stable employment and achieving financial security.
