Canada Won’t Be the Fastest-Growing Economy in G7 Over the Next Year: Bank of Canada Governor

Bank of Canada Governor Tiff Macklem waits to appear before the House of Commons Standing Committee on Finance on Feb. 16, 2023, in Ottawa. The Canadian Press/Adrian Wyld

Bank of Canada Governor Tiff Macklem says Canada’s economic growth will be outpaced by other countries in the G7, as the country goes through a “structural adjustment” to tariffs imposed by the United States.

Macklem made the comments during an appearance before the House of Commons finance committee on Nov. 5, where he was asked by Tory MP Jasraj Singh Hallan what is Canada’s position in economic growth compared to other G7 countries, given campaign promises made by Prime Minister Mark Carney on building the economy.

Carney said in January, shortly after launching his candidacy for Liberal Party leader, that he would “build the strongest economy in the G7.” Carney repeated his promise to build the “fastest-growing economy” in the G7 throughout the general election campaign, though he did not cite a specific timeframe for the goal.

“I don’t have all the G7 forecasts in front of me, but... we’re not going to be the fastest-growing economy in the G7 over the next year,” Macklem told the committee.

The G7, also known as the Group of Seven, is an intergovernmental political and economic forum consisting of Canada, France, Germany, Italy, Japan, the United Kingdom, and the United States.

Macklem told the committee in his opening statements that the Bank’s forecast on Canada’s economic growth for the remainder of 2025 is “very modest” and will average approximately 0.75 percent.

“We do expect it to pick up, but... this is a structural adjustment, and so that’s going to take some time,” he said.

The International Monetary Fund projected in July 2024 that Canada would be the fastest-growing economy in the G7, growing at 2.4 percent that year compared to 1.3 percent in 2023. That was before U.S. President Donald Trump imposed a series of tariffs on Canada, impacting sectors such as steel, aluminum, copper, automotives, and energy.

The Conservatives have accused Carney of breaking his “promises,” saying he has instead delivered the “fastest-shrinking economy in the G7.” According to the Organization for Economic Co-operation and Development, Canada’s economy shrank by 0.4 percent in the second quarter of 2025, while all other G7 economies grew except for Germany, which shrank by 0.2 percent, and Italy, which shrank by 0.1 percent.

The Bank of Canada’s October Monetary Policy Report stated that the country’s economy contracted by 1.6 percent in the second quarter of 2025 due to U.S. tariffs having a “severe” impact on certain sectors. Forecasts indicate that Canada’s total GDP growth for 2025 is projected to be 1.2 percent, while for 2026 it is expected to grow by  1.1 percent, and in 2027 it will expand by 1.6 percent.

Canada’s GDP on ‘Lower’ Path

Macklem told the committee U.S. tariffs have “diminished Canada’s economic prospects,” which limits the Bank’s ability to boost demand and keep inflation low. He said monetary policy cannot undo the damage caused by tariffs, and that Canada’s GDP is on a “lower” path because of the trade war.

“But I will add, there are things the country can do to get on a higher path,” he said. “We don’t need to accept a lower standard of living.”

Macklem said the Bank of Canada had lowered its policy interest rate by 100 basis points since the start of the year, from 3.25 percent to 2.25 percent, to support Canada’s economy during the trade dispute. He said the bank’s governing council sees its current interest rate at the “right level to keep inflation close to 2 percent while helping the economy through this period of structural adjustment.”

“We will be assessing incoming data carefully relative to the bank’s outlook, and if the outlook changes, we are prepared to respond.”

Macklem said if Canada were to have productivity growth comparable to that experienced by the United States in recent years, “the standard of living of Canadians would be much higher than it is today.” Canada has had a “long-standing” issue with productivity, he said, adding that while Canadians are primarily concerned with the rising price of goods, higher productivity will increase affordability.

“We’re not going to lower the price level... that would have a very negative effect on the Canadian economy. You'd have to have a big recession. Nobody wants that,” Macklem said. “So the question is, how do you make things more affordable? Well, you have to grow the top line. If there’s more income, then things are more affordable.”