Federal budget charts difficult path out of current crisis — with small margin of error
CBC
The 2025 federal budget plots a path for the Canadian economy to emerge from the current crisis. But it also highlights just how deep a hole the economy is in right now and how small the margin for error is as Canada navigates the perils of a trade war.
“This budget must be generational in its ambition and serve to shape our economy and our nation’s future,” said Finance Minister François-Philippe Champagne. “There is no place for withdrawal, ambiguity or even standing still; only for bold and swift action.”
The budget lays out various scenarios for economic growth over the next five years. The so-called upside scenario envisions a world in which U.S. tariffs are rolled back and global trade works its way back to normal.
Under the “downside scenario,” the Canadian economy would contract through the quarter running from April to June. Unemployment would peak around 7.4 per cent and Canadian growth would be weak for several years.
“Nominal GDP [would be] on average lower by $51 billion per year over the forecast horizon relative to the August 2025 survey forecast,” the budget says.
That scenario would see a further weakening of the Canadian economy — and it’s not far fetched. It is still entirely possible that next month’s GDP numbers will show Canada slipped into a recession this summer and unemployment has been rising for months.
The budget makes a clear promise about the road ahead: that Canada will rise relatively quickly from the ashes of two quarters of trade chaos.
But David Macdonald, senior economist with the Canadian Centre for Policy Alternatives, says there is a problem with that promise.
“It’s not clear to me that the chaos ends, and that the impact on Canada ends any time soon,” he said.
Macdonald says the budget promises to rethink the Canadian economy; to help businesses find new markets; and to help industries adjust to a new, less predictable future than the one they
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