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Defence spending will lift Canada’s economy, but not out of a recession: report
CANADA, JUL 17 – Canada’s defence spending will boost GDP by 0.1% annually but requires tripling the budget to over $150 billion, hindered by procurement delays and economic risks, Oxford Economics said.
- Oxford Economics released an analysis on July 17, 2025, forecasting a trade war-induced recession in Canada despite increased defence spending.
- The recession results from ongoing U.S. trade policy uncertainty and tariffs, which are causing firms to delay investments and cut production.
- The report details that Canada's labour market has shown short-lived resilience with 83,000 jobs added last month but expects 140,000 job losses and unemployment rising to 7.6% later this year.
- Canada’s defence spending commitments will increase real GDP by only 0.1 percentage points this year and next, with growth up to 0.9% in 2025 and inflation projected to reach 3% by mid-2026.
- While defence spending lifts the economy slightly, it will not prevent recession, and financing it through deficits risks a permanently higher debt-to-GDP ratio amid planned 15% operational cuts.
38 Articles
38 Articles
Defence Spending Will Lift Canada’s Economy, but Not out of a Recession: Report
Ottawa’s ramped up defence-spending plans will give the economy a lift, but not enough to save it from a recession, a newly released report forecasts. The updated analysis from Oxford Economics published Wednesday projects that Canada’s defence spending commitments will raise the country’s real gross domestic product by a tenth of a percentage point this year and next. That would bring growth up to 0.9 per cent annually this year and 0.4 per cen…
According to the Government of Canada's will, the defence security sector will be at the heart of multiple industrial initiatives over the next ten years when defence spending will explode to account for 5% of Canada's GDP, compared to 2% now. High-level companies and different sectors of activity will benefit from this new, more security-oriented environment.
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