Canada's economic outlook is facing renewed pressure after financial-market participants trimmed their expectations for economic growth in 2026.

The Bank of Canada's latest Market Participants Survey, released July 27, found that respondents expect Canada's real GDP to grow by a median 1.3% by the end of 2026. The median forecast for 2027 is 1.9%.

The outlook comes as Canada's economy continues to adjust to U.S. tariffs, trade uncertainty and slower population growth. The Bank of Canada has said economic activity has been weak, although there are signs that growth could strengthen.

Trade remains a key concern for businesses and investors. The upcoming review of the Canada-United States-Mexico Agreement (CUSMA) is adding another layer of uncertainty, particularly for Canadian exporters and companies with cross-border supply chains.

At the same time, inflation remains an important factor. The Bank of Canada reported that headline inflation had moved above 3% following higher energy costs, although inflation excluding gasoline and core inflation measures remained closer to the central bank's 2% target.

The latest survey suggests Canada's economy could gradually improve, but trade policy and global economic conditions remain significant obstacles. Businesses are likely to continue watching developments in Canada-U.S. trade relations closely as they make investment and hiring decisions.

The Bank of Canada currently maintains its policy rate at 2.25%, with its latest July report projecting that economic growth should pick up while inflation gradually eases.

For Canadians, the combination of modest growth, trade uncertainty and elevated inflation means the economic recovery could remain uneven through the rest of 2026.