Bank of Canada Chief Expects Q2 GDP to Fall Sharply Behind Q1
– Bank of Canada Governor Tiff Macklem stated on Thursday that he anticipates the second-quarter growth to be significantly lower compared to the first quarter, pointing out slow business investments and the impact of U.S. tariffs as contributing factors.
Last month, the central bank predicted that the annualized GDP for the first quarter would reach 1.8%, without providing additional projections due to uncertainties surrounding U.S. tariff policies.
Statistics Canada plans to release the first-quarter GDP figures on May 30, and Macklem stated that he anticipated exports would support economic growth, considering companies hastened deliveries of products to the U.S. prior to tariff implementations in April.
“I anticipate that the second quarter will see considerably weaker performance due to the fact that demand was pulled ahead, resulting in lower activity for the following quarter,” he stated during a televised press briefing after attending a gathering of G7 finance ministers and central bank governors in Banff.
He additionally mentioned that both consumer spending and corporate investments would likely remain slow, as businesses have halted their strategies.
“From here onward, I believe, largely hinges on how tariff changes unfold,” he stated. Last month, the bank presented two potential outcomes for this situation.
In the initial situation, the majority of tariffs would be eliminated through negotiations, leading to a temporary dip in both Canadian and worldwide economic growth. The decline in Canadian inflation would drop to 1.5% for one year before rebounding to align with the central bank’s 2% objective.
In the alternate situation, the tariffs would ignite an extended worldwide trade conflict. As a result, Canada would experience a substantial economic downturn with inflation rising over 3% around mid-2026 prior to dropping back to 2%.
(Reported by David Ljunggren; Edited by David Gregorio)