Canada’s economy is at an “economic standstill” with real GDP forecast to increase by just 0.6% this year, according to a report by The Conference Board of Canada. However, things should improve in 2025.

“Inflation has and should continue to moderate, but we’re unlikely to see drastic rate relief from the Bank of Canada until midyear,” Ted Mallett, director of economic forecasting at The Conference Board of Canada, said in a press release. “Once they kick in, the growth outlook in 2025 is a much brighter 2.3%.”

Among the factors affecting Canada’s economy, the housing sector faces conflicting forces, the organization said. Population pressures require a significant increase in building activity, but high costs and elevated lending rates are disincentivizing building. There have been hopeful policy changes all levels of government, but that is not enough, according to the organization.

The US economy continues to grow. The Conference Board of Canada’s baseline view is the US economy will grow this year but not go into a recession. Reliance on the US benefited Canada’s trade sector in 2023; however, that influence is expected to moderate in 2024.

Canada’s slowing national economy has cooled the labor market. Employment growth is expected to remain muted in the first half of this year.

High borrowing costs have also challenged business investment in Canada, according to the organization.

“Capital investment in the oil patch will continue, but not at pre-pandemic norms,” according to the organization. “The yardsticks are moving on the energy transition and post-Covid business patterns, but it is too early to see how they will settle into a sustainable rate of investment. With often fractious intergovernmental disagreements and a federal election on the horizon, the prospect of pendulum shifts in major policies add to business investment risk.”