Canada's Economy on 'Life Support' as Experts Warn of Looming Recession
A stark new economic analysis has sounded the alarm on Canada's fiscal health, with one prominent economist declaring the nation's economy is not only on life support but has been circling the drain for years. The warning comes from a bombshell Rosenberg Research report released last week, which suggests Canada is teetering on the brink of a devastating recession unless strong corrective measures are implemented immediately.
Flat GDP Growth Signals Deep Trouble
The report, titled Canadian Economy on Life Support, paints a grim picture of Canada's economic trajectory. Following a disappointing industry jobs report in late January, the monthly Canadian GDP release showed a flat reading in November—failing to meet the consensus expectation of a modest 0.1% month-over-month uptick. This stagnation came on top of a discouraging 0.3% month-over-month drop in October.
Statistics Canada's advance estimate for December indicates a minuscule 0.1% month-over-month increase, suggesting the Canadian economy is expected to shrink outright in the fourth quarter. The projected decline of 0.5% on a quarter-over-quarter annualized basis is worse than the Bank of Canada's forecast of a flat 0.0% growth rate. These numbers mean the economy has contracted in two of the last three quarters, putting Canada on a dangerous course toward a possible recession in the coming year.
Uncompetitive Tax Policies Hindering Growth
According to Franco Terrazzano of the Canadian Taxpayer Federation, Canada's economy isn't firing on all cylinders, and Canadians are feeling the pain daily. A significant reason for our economic slump is that taxes are too high, governments are taking too much money, and Canada's uncompetitive tax system is scaring away investment, Terrazzano explained. He emphasized that government regulations also make it extremely difficult to build major projects in Canada, further stifling economic potential.
Canada's tax competitiveness rankings tell a troubling story. In the 2025 edition of the Tax Foundation's International Tax Competitiveness Index, Canada ranks 27th out of 38 Organisation for Economic Co-operation and Development nations on individual tax competitiveness and 22nd on business tax competitiveness. By comparison, the United States ranked ninth and 17th respectively in the same index. The report highlighted that Canada's capital gains taxes are well above the average of other OECD nations, creating additional barriers to growth.
Questioning Long-Standing Economic Strategies
Dr. Eric Kam, an economics professor at Toronto Metropolitan University, argues that Canada's economic strategies over the past decade have been fundamentally flawed. You can blame everything, if you want, on Trump and the tariffs, but that really doesn't tell the whole story, Kam stated. What tells the whole story is that, from the minute we voted Justin Trudeau into office, we got very confused about what GDP is and what economic growth means.
Kam points to the two-pillar approach adopted by both Trudeau and current Prime Minister Mark Carney—relying on immigration and low interest rates to stimulate growth—as particularly problematic. Immigration has never been a sound growth strategy, he asserted. It's a big, abject failure, especially with the numbers that we brought in. He compared the strategy to pulling a magic trick, suggesting that simply keeping interest rates low to encourage borrowing and spending doesn't address the underlying issues.
The Need for Fundamental Economic Rethinking
What's missing from the conversation, according to Kam, is attention to the supply side of growth. Meaning research, development, innovation, more competition, he explained. Those are the things that actually allow the ability of our economy to produce goods and services to shift to the right. He noted that Canada's statistics on productivity and innovation—crucial measures for a thriving capitalist economy—are going nowhere.
Kam distinguishes between business cycles and genuine economic growth. That is a business cycle, the male anatomy of economics—what goes up, must come down, and if you're lucky, it comes back up again, he said. Growth is the ability of your economy to produce goods and services—not what you can produce, but can you get your economy to a place that previous levels of goods and services that were not even available are now available. He concluded that Canada hasn't achieved this kind of meaningful growth in over a decade, and that's precisely what's on life support.
The report's authors and economic experts agree that saving Canada's economy requires more than just tariffs and tax cuts. It demands a comprehensive rethinking of growth strategies, with a renewed focus on innovation, productivity, and creating an environment where businesses can thrive and invest with confidence.
