As Canada approaches 2025, several pivotal factors are set to influence its business landscape. A recent BMO report indicates that nearly a third (30%) of Canadians plan to minimize their spending in the upcoming year, reflecting growing financial anxiety among consumers. The report, based on Ipsos panel data collected from September 2 to 14, 2024, surveyed 3,404 participants and revealed that 46% of Canadians feel the impact of a higher cost of living, while 82% express concerns about their overall financial situation and unexpected expenses [a3128d4c].
In addition to consumer sentiment, the Bank of Canada has made significant adjustments to its monetary policy, cutting interest rates five times in 2024 to a current rate of 3.25% as inflation has moderated. In a recent speech, Tiff Macklem, Governor of the Bank of Canada, noted that inflation, which peaked at close to 7% in December 2022, has now returned to the target of 2%. The economy grew by 1% in the third quarter of 2024, reflecting a recovery trend [38bafcb4].
The political landscape is also shifting, with the upcoming federal election generating considerable attention. The Conservative Party currently leads in polls and proposes to abolish the carbon tax, with the election anticipated to take place in spring 2025 or on October 20, 2025 [02314211]. Additionally, the inauguration of Donald Trump as U.S. president on January 20, 2025, is expected to have significant implications for Canada-U.S. relations, particularly regarding trade policies and tariffs, which could affect Canadian businesses. President-elect Trump has threatened a 25% tariff on Canadian goods, raising concerns about the economic relationship between the two countries [35a45bb8].
Labour unrest remains a pressing issue as unions challenge government interventions in disputes and advocate for higher wages in response to inflationary pressures. Tiff Macklem highlighted risks such as elevated wage increases and potential U.S. tariffs that could impact economic stability [38bafcb4]. Meanwhile, the Canadian stock market has reached record highs, surpassing 25,000 points in 2024, reflecting investor confidence and expectations to keep pace with the S&P 500 [02314211].
The International Monetary Fund (IMF) projects global GDP growth of just above 3% for 2024 and 2025, with U.S. real GDP growth estimated at 2.5% in 2025 and Canadian real GDP growth projected at 1.5% [35a45bb8]. Canada must safeguard its relationship with the U.S. amidst potential tariffs, and addressing productivity growth is seen as a critical vulnerability for the economy. A strategy for productivity growth is essential for rising incomes, necessitating investment in innovation and infrastructure [35a45bb8]. The Canada–United States–Mexico Agreement (CUSMA) will also be reviewed by 2026, which could further influence trade dynamics [35a45bb8].
The interplay of these factors—consumer spending habits, monetary policy, political shifts, labour dynamics, and market performance—will be crucial in shaping the economic outlook for Canada in 2025. As the country navigates these changes, businesses and consumers alike will need to stay informed and adaptable to thrive in this evolving environment [02314211].