Citing weak economic data, Moody’s Ratings is trimming its forecast for Canadian economic growth.
In a new report, the rating agency said that most of its growth forecasts are steady, as the global economy is largely weathering the energy shock and inflation sparked by the U.S. war in Iran. It continues to see G20 growth of 2.5% this year and 2.6% in 2027.
However, within that headline stability for the G20, Moody’s is revising certain forecasts up, and others down. It expects just 1.6% growth for the advanced economies of the G20 in 2026, compared with 3.8% for emerging market economies.
For Canada, it now sees just 1% growth this year, which is a downward revision — before growth picks up to 1.8% in 2027.
“[M]odest downward revisions to Canada’s and Russia’s forecasts reflect softer-than-expected data, notwithstanding support from higher oil prices,” the report said — adding that U.S. tariff policy “remains a key source of uncertainty and drag in the Canadian economy by delaying investment, business expansion and hiring.”
That U.S. trade policy has so far failed to meet its purported economic objectives, the report noted.
“More than a year after their introduction, tariffs have failed to achieve the stated macroeconomic objectives of reducing the current account deficit and revitalizing manufacturing employment, while households bear much of the cost through higher prices,” it said.
Despite the economic failure of U.S. tariffs, “persistent trade imbalances will remain a source of geopolitical friction,” it said. “Consequently, trade frictions are unlikely to go away in the foreseeable future, prolonging policy uncertainty and complicating planning and investment decisions for businesses.”
Along with erratic U.S. trade policy, the other key risks that Moody’s is tracking for the coming year include the AI investment cycle, the fragility of bond markets and energy market uncertainty.
“Overall, global growth will likely firm only modestly in 2027 as shipping and energy supply conditions gradually normalize,” it said. “A more synchronized acceleration would require a significant easing of the multiple sources of uncertainty, as well as strong and broad-based productivity gains from AI-driven innovation. We do not yet see either dynamic building with sufficient force.”