An End to Doom and Gloom? Canada’s 2025 Economic Forecast

While you’ve probably already seen the big winners of the Canadian Effie Awards here, prizes weren’t all the day had on offer. 

For the third year in a row, Shopify’s former head of commercial revenue learning and development, Ali Leung, took to the stage to interview The Globe and Mail’s senior business writer and columnist, Rita Trichur about all the economic trends of the past year, and what to expect going forward. 

Where last year, Rita theorised a possible recession which didn’t ultimately come to pass, she actually found that in spite of this, Canada had fared worse than expected. “So why am I saying this?” she asked. “Specifically, I’m talking more about consumer sentiment – it’s really soured. It feels like we’re in [a recession, even though we aren’t]. We really saw this after the back to school spending spree, where people started to pull back. In short, we do have a productivity problem, we do need to become collectively richer, and if we don’t address it, our standard of living is going to erode.”

The woes don’t end there either, according to the award-winning journalist. As it turns out, Canada also really underperformed its global peers, with unemployment rates – presently 6.5% – rising more quickly than in other countries, and at risk of hitting 7% next year.

However, it’s not all bad news. Inflation is expected to be back on target in most G20 countries next year, which includes Canada. In fact, the country is already ahead of the US in terms of getting back on track, which is something that Rita noted should “give people a lot of hope”. 

Additionally, as was announced on Tuesday, the Bank of Canada has started cutting interest rates which, while they won’t be noticeable for at least six to eight quarters, will ultimately enable consumer spending to pick back up again. “Until the back half of 2025, people are really going to be budget conscious,” she explained. “We’re in the transition period right now, and if people can just tighten their belts for the next little while, they’ll be able to prepare for better times.”

While Rita followed that up with a warning that it “might not be the same good times that we had prior to the pandemic”, she added that in conjunction with the fact that we’ll likely have a clearer picture about what’s happening with Canadian jobs by then, it’s not going to stay doom and gloom.

Another point she emphasised was the fact that even this year, there are things worth looking forward to. In particular, the upcoming holiday season is projected to be of critical importance, with Deloitte Canada forecasting that spending is going to rise by 10%, after declining in 2023. While the average shopper spend of $1478 is still lower than pre-pandemic levels, nevertheless, it still serves as a great opportunity for savvy brands and agencies to carry that momentum into 2025.

Of course, no forecast can be 100% accurate, and Rita also highlighted several risk factors which could impact the course of this trajectory in the imminent future. Ranging from geopolitical situations such as the one between Russia and Ukraine (which could result in a commodity crisis) to the upcoming US election, which has implications both for possible tariffs and the trade war with China, much of what is happening in the world could have a reverberating effect here in Canada.

But, even with all that said, it’s imperative that much of the focus remain on factors within Canada, and how we can influence our own economy. Top of the list for Rita is looking at what the government is doing, especially with regards to the subjects of immigration, small businesses and large corporations. 

In the case of the former, specifically, she warned that expected cuts to the number of people wanting to move to Canada could impact revenue streams. “A lot of businesses count on this flow of people to propel growth, so cutting is a double-edged sword,” she noted.

At the same time, she also hopes to see the government take an active role in restoring the success of small businesses and entrepreneurs which, since the pandemic-induced shutdowns, has really suffered. “I don’t think we’ve seen the recovery of that [entrepreneurial] spirit in Canada,” she lamented. “So, I think we need to start thinking strategically about what we can do to embolden and recover this to the levels it was.”

One such idea she has for achieving this is in enabling easier free trade within Canada. Where the government previously sent an “unfortunate message” during the pandemic – seemingly prioritising large businesses in keeping their money – this is now a chance for a do-over, in which it could be made easier for businesses to expand outside of their local markets and thereby gain scale.

But, she emphasised, this doesn’t mean trying to take down large corporations in exchange. In fact, Rita believes that the new wave of populism attacking large corporations, with government members picking and choosing large brands to target, is, ultimately, counterproductive.

“Canadians need to appreciate that we must have strong companies in this country,” she asserted. “When a company does something wrong, we call it out, but that’s very different from trying to use major corporations as a punching bag. It’s a problem when we have legislators who are putting their own political interests ahead of the common good. Let the market forces prevail as much as possible.”