Canada’s economic landscape for 2025 is expected to be defined by modest growth and a constrained fiscal environment. According to recent data from the Conference Board of Canada and a federal outlook from the Parliamentary Budget Officer (PBO), policymakers and businesses alike will need to navigate a year marked by uncertainty, limited stimulus capacity, and cautious optimism.
PBO: Federal Deficit Estimated at $46 Billion
The PBO projects a federal deficit of approximately $46 billion for the 2024–25 fiscal year. While this figure is lower than previously forecasted, largely due to stronger-than-expected revenues, it still represents a significant shortfall. Crucially, the report underscores that rising public debt charges—fueled by elevated interest rates—are consuming an increasing share of federal expenditures. This fiscal reality limits Ottawa’s ability to introduce new spending measures or tax relief without further increasing the national debt.
The size of the deficit also highlights the diminishing fiscal room available to respond to potential economic shocks. Should growth continue to slow or global trade tensions worsen, the federal government may find itself with fewer tools at its disposal to support the economy through traditional stimulus measures.
Conference Board: GDP Growth to Slow to 1.5%
In parallel, the Conference Board of Canada forecasts that real GDP will expand by only 1.5% in 2025. This figure reflects a notable cooling compared to historical averages and is driven by several interrelated factors. Ongoing housing market challenges, uncertainty in global trade—particularly concerning U.S. policy shifts—and muted investment growth are all expected to weigh on economic performance.
The report notes that while the economy showed slightly stronger momentum in early 2025, the second half of the year is likely to see reduced activity, especially in export-dependent sectors. Weakness in consumer demand and delayed capital expenditures further contribute to the subdued outlook. With inflation moderating but interest rates remaining high, households and businesses alike are exercising greater financial caution.
Implications for Canadian–Hungarian Economic Relations
For Hungarian companies and investors, the Canadian outlook presents both challenges and strategic openings. A slower growth environment may encourage Canadian firms to diversify trade relationships beyond North America, potentially increasing demand for European partnerships. Hungarian companies in advanced manufacturing, engineering, and technology may be well-positioned to offer solutions in sectors where Canadian firms are seeking innovation and cost efficiencies.
Additionally, with fiscal constraints likely to delay large-scale public investments in Canada, provinces and municipalities may look to international expertise through public-private partnerships. Hungarian infrastructure firms with global credentials could find new opportunities in these procurement channels.
However, the constrained credit environment and tight fiscal conditions mean that Hungarian exporters and investors should monitor Canadian financial trends closely—particularly in lending markets and public-sector contracting—throughout the remainder of 2025.
Conclusion
The Canadian economy enters the second half of 2025 on uncertain footing. While the country avoids a recession, both the $46 billion federal deficit and subdued GDP growth suggest a year of cautious policymaking and tempered private-sector expectations. For those engaged in Canadian–Hungarian economic relations, staying agile and informed will be key to identifying and leveraging new opportunities in a slower, yet still dynamic, economic environment.
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Written for the Canadian Chamber of Commerce in Hungary News Section as part of our ongoing coverage of developments affecting Canadian trade, economy and international partnerships, July 2025
