Ontario and Quebec are expected to be more affected by commercial interruptions this year, with Wednesday the two largest provinces in Canada among the provinces for growth in 2025, according to a perspective published by Deloitte on Wednesday.
Ontario’s economy is expected to grow by 0.4 percent this year, while Quebec is expected to have the second growth of 0.5 percent.
“Tariffs are expected to be more shocking in Ontario, since it is the best steel exporter and finished cars,” the report said. “In fact, the eastern parts of the eastern Canada face the most moderate economic growth forecast this year, with particularly hard ontarium given its exposure to industries with large established rates.”
Dawn Desjardins, chief economist of Deloitte Canada and taxpayer to the report, said that the decrease in immigration will also have an effect.
“We are going to see much lower entries in the workforce in these two provinces and that will weaken consumption and really keep the economy in a slower trajectory,” he said.
Meanwhile, energy producing provinces such as Newfoundland and Labrador, Alberta and Saskatchewan lead growth this year.
Like its economic perspective in April, Deloitte expects the Canadian economy to be in a modest recession in the second and third quarter of this year before returning to growth at the end of 2025.
In general, Deloitte’s forecast requires the Royal Gross Domestic Product (GDP) to grow 1.1 percent this year and 1.6 percent in 2026.
Deloitte also expects the labor market to continue deteriorating throughout the summer and autumn, with an unemployment peak at 7.3 percent in the third quarter. The unemployment rate reached seven percent in May.
“The losses have been more pronounced in the manufacturing sector, where tariffs on steel, aluminum, soft wood and finished passenger vehicles are already having an impact,” the report said. “We are seeing that weakness is spilled in other industries, with transport and storage and commercial services also recently reducing their labor forces.”
Commercial investment is expected to remain negative during most of the year before recovering at the end of 2025, depending on the assumption that there will be more coherence in Canada’s commercial relationship with the United States and that there will be plans on how large Canadian infrastructure projects will proceed.
Deloitte stressed that the recent federal legislation to accelerate projects in the federal interest and eliminate internal commercial barriers could provide an impulse to perspectives.
“Our reference opinion is that we obtain this clarity, and we have indications about how the economy evolves with respect to government spending,” said Desjardins. “That in itself will shake some corporate dollars on the sidelines and we will see some investment activities to collect.”
Deloitte also awaits two more cuts at the Bank of Canada’s policy for the end of the year.
“If the economy performs the way we expect it, that will exert a descending pressure, and that will give the Bank of the Canada to reduce the policy rate further,” Desjardins said.
The Canadian and American governments are in conversations on a new economic and security agreement, with both parties that indicate that it could be achieved before July 21, although Prime Minister Mark Carney tempered expectations while in Brussels on Monday by saying that “the correct agreement is possible, but nothing is assured.”
Even so, if an agreement is reached next month with the US administration. In relation to tariffs, Desjardins said it could be positive for the perspective if Canada’s preferential treatment is maintained under the United States-Mexico Agreement of Canada-Mexico.
“If that happened, I would give up these numbers rise,” he said.
• Email: jgowling@postmedia.com
