The Canadian economy is expected to grow by 1.1 per cent in 2025 and 1.2 per cent next year, according to a report released by the

Organisation for Economic Co-operation and Development (OECD) on Tuesday. The OECD has revised up the Canadian growth outlook by a modest 0.1 per cent for both 2025 and 2026, compared to its previous interim economic outlook earlier this year. The OECD also upgraded global growth for this year to 3.2 per cent compared to the 2.9 per cent previously forecasted, as economies showed more resilience during the first half of 2025.

“The full effects of tariff increases have yet to be felt — with many changes being phased in over time and companies initially absorbing some tariff increases through margins – but are becoming increasingly visible in spending choices, labour markets and consumer prices,” the report said.

For 2026, the OECD kept its global growth forecast the same, with the global economy expected to slow to 2.9 per cent, as tariffs and uncertainty weigh on demand.

“It’s important to say that the uptick that we see in global growth is mostly due to revision in some emerging market economies,” said OECD chief economist Alvaro Pereira, in a press conference in Paris on Tuesday. “Having said that, we see over the next few months that activity will be affected … and we expect somewhat slower growth going forward.”

Canada’s growth in 2026 is expected to rank just behind the United States among its G7 peers. U.S. growth is expected to slow to 1.8 per cent this year, revised up from 1.6 per cent, before slowing to 1.5 per cent in 2026.

On the inflation front, the OECD forecast has Canadian headline inflation hitting two per cent in 2025 and 2026 with core inflation hovering around 2.6 per cent in 2025 before falling to 2.1 per cent next year.

The OECD also noted the Canadian labour market has deteriorated in recent months. “While the unemployment rate has increased in South Africa, India, Canada, France, Australia, Germany and the United States, it has fallen in other countries, most notably Korea, Turkey, Brazil, Italy and Spain and reached a historical low in the euro area,” the report said.

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“Signs of weaker labour demand are also apparent in continued gradual falls in the ratio of job vacancies to the number of unemployed in the United States, Germany, Australia, the United Kingdom and Canada.”

The OECD also expects policy rates to gradually ease in Canada, Australia and the United Kingdom.