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Not Quite the USA, But Canada’s Fiscal Challenges Can’t Be Ignored

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Without a change in course, slow growth and rising spending will leave Canadians with stagnant living standards while shifting more of today’s burden onto younger and future generations, according to a new C.D. Howe Institute Verbatim.

In “The Endgame: Time to Act on Canada’s Economic and Fiscal Challenges,” author Don Drummond warns that Canada’s weak productivity and income underperformance, overreliance on US markets, and overall domestic vulnerabilities are not being taken seriously enough. He recommends a comprehensive economic plan to re-establish fiscal stability and help create a stronger, more resilient and diverse economy.

“With weak productivity growth, an ageing population and lower immigration, Canada’s economy could grow by just 0.5 percent this year and next,” says Drummond, Fellow-in-Residence at the C.D. Howe Institute. “That means rising deficits and debt, leaving governments with less fiscal room to respond to future challenges and improve living standards.”

The report states that Canada should expect continued tensions with the United States, making it more important to address its longstanding economic and fiscal weaknesses. Canada ranked last in the G7 for growth in gross national income per person over the decade to 2023 and has experienced persistently weak productivity growth. Combined with reduced access to US markets, these challenges make it harder for Canadian firms to compete and scale internationally. Drummond finds that these pressures will be harder to address as Canada’s population ages and the economy struggles to adapt to the costs of climate change.

His recommendations include eliminating internal trade barriers and streamlining regulatory processes, while reshaping taxes and spending to reduce deficits and support growth. This could include shifting some of the tax burden from corporate and personal income toward consumption, lowering marginal tax rates, and reviewing government spending to ensure better value for money. He also calls for maintaining environmental objectives and allowing post-secondary institutions greater flexibility on tuition. As frictions with the US persist and Canada’s federal deficits climb, Drummond calls for governments to act quickly but also asks that Canadians recognize that meaningful improvements will take time.

“While many cite Canada’s lower net debt-to-GDP ratio than other G7 countries, being the least indebted country in a heavily indebted group is not a fiscal strategy. The endgame should be a stronger, more resilient, and diverse economy with stable finances,” concludes Drummond. “Now’s the time to act.”

Introduction

A year ago, I spoke to the incoming 2025/26 Master of Public Administration (MPA) class about the economic and fiscal challenges facing Canada and the need for bold action (Drummond 2025). Conditions have not improved. You may think the latest trade friction with the United States suggests they have worsened, but a deterioration in the relationship was highly predictable, and tensions should be expected to continue. While some positive action has been taken, Canada is still not taking the challenges seriously enough. The bold action called for can be postponed no longer.

The Economic and Fiscal Challenges

Over the decade to 2023, gross national income per person grew a meagre 0.5 percent annually in Canada, ranking last in the G7 and 32nd out of 35 Organisation for Economic Co-operation and Development (OECD) countries (Drummond, Laurin and Robson 2026). This weak income growth reflects longstanding productivity underperformance relative to both Canada’s own history and other countries.

Canadian economic outcomes fall well short of US standards, and gaps are widening. Some take comfort in the argument that higher US averages are heavily influenced by the disproportionate number of extremely wealthy Americans. Yet the shortfall in Canadian inflation-adjusted median employment income was already substantial at CA$6,126 in 2010 and widened to $8,663 by 2024. From 1999 to 2025, Canadian productivity increased 26.7 percent, while US productivity rose 67.9 percent (Munro, Fuss and Emes 2026).

A severe blow to Canada’s most important trading relationship piles on top of the productivity challenge. The two interact in pernicious ways. Weak productivity makes it difficult to trade with other nations. Losing relatively free access to the US market makes it difficult for Canadian firms to build the scale needed to improve productivity.

Population ageing and climate change make the productivity and trade challenges even more difficult to address. An ageing population reduces the workforce and draws resources into healthcare and pensions. Climate change is exacting billions of dollars a year through infrastructure repairs, health costs, and rising insurance premiums resulting from flooding, wildfires, and extreme weather. The Canadian Climate Institute estimates that climate change will reduce Canada’s long-term annual economic growth rate by almost half, compounding into losses of hundreds of billions of dollars or more by the end of the century (Drummond, Philips and Harland 2026).

Canada’s fiscal situation acts as a drag on growth and limits our ability to address these challenges. The federal government alone projects deficits exceeding $50 billion a year as far as the eye can see, a net debt-to-GDP ratio staying above 40 percent, and tax and spending parameters that dull incentives to grow. And such dire outcomes do not fully reflect the commitment to massively increase defence spending. At least Canada’s fiscal situation and prospects are not as dire as those of the United States and many other countries.

Re-establishing fiscal stability is especially important now to mitigate the contagion from rising global bond yields, driven in good part by growing public debt burdens and a surge in long-term financing needs for artificial intelligence (AI). Canadian bond yields are creeping up but remain about 1 percentage point below US rates. That borrowing advantage is not guaranteed.

Inaction on stabilizing public finances is often justified by the Canadian federal government’s lower debt burden compared to other major countries and our own history. But the Canadian debt advantage is much less pronounced when considering all levels of government and using gross debt – which removes the current surpluses from the Canada and Quebec Pension Plans, which are not available to fund public services other than pensions. The current federal net debt burden of just over 40 percent of GDP, with about 13 cents of every revenue dollar going to debt charges, compares favourably with the 66.6 percent net debt-to-GDP ratio of 1995/96, when debt charges absorbed 35.2 cents of every revenue dollar. But it makes no sense to risk following the path of more indebted countries, which face even higher bond yields, or to repeat the worst of our own fiscal history, when Canada struggled to find buyers for its debt.

The only good thing that came out of Canada’s dire fiscal situation in the mid-1990s was the acceptance of a crisis and the will to act boldly. Surely, we can have the foresight to act boldly now before again hitting a fiscal wall.

The Status Quo is Unpromising

Drummond and Mahboubi (2026) projected Canada’s future economic growth rate assuming productivity continues to grow at its meagre average rate since 2000. Applying this assumption to the demographics resulting from population ageing and the new, lower immigration targets, this “supply-side” perspective on growth yields just 0.5 percent real GDP growth this year and next, and an average of 1.4 percent from 2026 to 2060 if the downward trend in average hours worked is arrested, or 1.2 percent if it is not.

The federal deficit would rise from the $50-billion-plus annual range projected in the 2026 Spring Economic Update, and the debt burden would continue rising as a share of GDP.

The bottom line would be stagnant economic well-being for individuals and a massive transfer of burdens to younger and future generations.

The Challenges Are Not Being Taken Seriously Enough

Undoubtedly, part of the reason bolder action has not been forthcoming is that many economists, especially forecasters, have put a rather rosy spin on prospects. Typical forecast assumptions include no further increase in the average tariff rate on Canadian exports and diminishing trade uncertainty. In other words, they attach no credibility to the rhetoric of President Donald Trump or the many trade agreements the US has been signing around the world that feature significant base levels of tariffs, with higher rates and quotas on selected products. We continue to see such a spin, with many rushing to predict that the latest round of US tariffs against Canada will only reduce real GDP by 0.4 or 0.5 percent, while assuring us that at least we still have the Canada-United States-Mexico Agreement (CUSMA).

Such analyses of what is taking place at the margins miss the point that the fundamental premise of all free trade agreements struck with the United States over the past few decades – that companies, whether Canadian or foreign, can freely access the US market from a base in Canada – has been broken. It will take a long time, if ever, to restore confidence in that premise. We must ask: if companies were not investing much when they thought they had access to the US market, why would they when such access is threatened?

It is difficult to comprehend the steadfast assurance that average tariff rates will not rise or CUSMA protections will remain. The US has rejected automatic renewal of CUSMA, is breaking its commitments daily, and has made it clear that it expects to extract a fee from all those American firms that buy from outside the United States. The sort of fee it appears to have in mind, and has been extracting from other countries, can make it unprofitable for Canadian exporters and US importers to do business.

Output per hour worked – productivity – has averaged 0.8 percent growth since 2000 and only 0.5 percent over the past four years. Yet most forecasters assume much stronger rates going forward. The Bank of Canada, for example, assumes 1.4 percent average annual growth in productivity through 2028, a pace not seen in decades. It adds 0.2 percentage points per year for the growing application of AI and assumes employers will squeeze more output per worker from the dwindling labour force. These are unproven assumptions and still do not fully explain the optimism. Such forecasts feature much stronger growth than the “supply-side” projections of Drummond and Mahboubi (2026). The latter are not a forecast per se. Productivity could grow more strongly. Demand growth could outstrip supply. But outcomes could just as easily be even weaker. Given global uncertainty and trade tensions with the United States, it would be wise to take such downside risks more seriously.

The Bank of Canada should be given credit for at least thinking about the macroeconomic implications of AI applications. But much more work needs to be done on these issues. And in the meantime, some healthy scepticism about AI’s potential benefits for productivity is in order. First, there have been many technological breakthroughs during the period of Canada’s declining productivity growth. Second, work by the Future Skills Centre (2024) found that while firms applying AI have higher productivity than those that do not, AI itself did not raise productivity.

If the challenges were being taken seriously enough, the federal government would not have abandoned its promise from five years ago to establish an independent commission on productivity. It also would have followed through on its election promise to establish a group to examine corporate taxation. Clearly, the government understands the problems but has decided not to call upon expert advice or encourage national discussion at this time.

If the challenges were taken more seriously, we would not see federal and provincial politicians uniting in the quest for international free trade while maintaining internal trade barriers. The International Monetary Fund has said these barriers are equivalent to a 9 percent external tariff on all Canadian goods and services, and that removing them could raise real GDP by 7 percent in the long run (Diez and Yang 2026). Some barriers have been reduced since the IMF made these estimates, but they remain substantial.

If the challenges were taken seriously, we would see a concerted national – federal, provincial, territorial, and municipal – effort to streamline regulatory processes. Federal approval alone of projects can easily take more than five years. Add often separate and sequential approval processes at the provincial, territorial, municipal, and Indigenous levels, and the projects being bandied around amid renewed interest in infrastructure may not even start for a long time.

Canada’s potential advantage in critical minerals is being cited often of late. But development, if it proves to be economically beneficial, could take decades. The federal government is taking action, including setting up a Major Projects Office and enacting the Building Canada Act. It has been noted, however, that the underlying obstacles – “political decision-making over individual projects and open-ended criteria that require regulators to consider broad public policy objectives” remain largely unaffected (Vegh and Koplovich 2026).

If the challenges were taken seriously enough, we would have a comprehensive federal economic plan that realistically lays out the challenges, presents options for national consultation, and sets out a plan for bold action. Instead, we get speeches, webinars, and budget documents that cover the territory only partially and reach relatively few Canadians. The prime minister has said Canadians will be required to make sacrifices. But time after time, the government softens those sacrifices by borrowing more money: to increase the Old Age Security payments for those 75 and over, a cohort with one of the lowest poverty rates; to rename the GST low-income credit the Canada Groceries and Essentials Benefit (CGEB) and increase it; to offer more incentives to first-time home buyers and purchasers of new homes; to suspend the federal gasoline excise tax for six months – and then extend the suspension as gasoline prices failed to decline; and to put still more money into subsidies for childcare.

In all these cases, the federal government addresses affordability issues by borrowing more. That simply transfers the burden forward. Where there is a demand-supply balance, demand is stoked further with much less effort applied to supply enhancement. Affordability challenges would be better met by greater efforts to raise Canadian productivity and incomes. Some of the government’s actions, such as more infrastructure spending, will certainly help productivity, but a cohesive plan is not being applied across all spending.

If the challenges were taken seriously enough, we would not see the federal government take the more than $5 billion fiscal windfall from higher oil prices and spend every cent of it in the 2025 budget, mostly to bolster consumption. We would not have seen an 80 percent increase in government operating costs over 10 years, with a 90,000 expansion in the number of federal civil servants – a one-third increase – together with a doubling of contracting costs. Average compensation for full-time equivalent bureaucrats also reached $143,271 (Terrazzano 2026). That is far higher than what is made by the majority of Canadians funding such pay through their taxes. Despite this growth, services do not appear to have improved. The government has cited new programs such as pharmacare and the Canadian Dental Plan, but much of the administrative burden is carried by the provinces and the private sector. Efforts to cut federal spending have been half-hearted, often going little beyond incentivizing civil servants to leave. Even after these so-called cuts, the ratio of program spending to GDP, is projected to reach its highest level since 1994/95 by 2030, outside of the pandemic years.

What Would a Strategy Look Like?

The starting point for a more serious course of action would be to put a comprehensive economic plan to Canadians, realistically depicting the challenges and options for action. If Canadians understand the gravity of the situation, they will give political licence to act, as they did with the initial Free Trade Agreement and the assault on the deficit in 1995.

Governments and private sector agents would cut the wishful thinking from their projections and depict the probable problems under the status quo.

Governments at all levels and in all jurisdictions would unite to finally end internal trade barriers. They would work together to streamline regulatory processes without compromising environmental standards or Indigenous rights. And they would do it soon and quickly.

Governments would radically alter the fiscal landscape with lower deficits and debt burdens and taxation and spending parameters targeted at promoting growth. The focus would be on much lower spending. Restoring the ratio of program spending to GDP that prevailed from 2003/04 to 2019/20 would reduce spending by $66 billion by 2030 and, on its own, bring the budget back close to balance.

The federal government would proceed with the promised review of taxation. The recommendation would inevitably be to shift the composition of Canadian taxation away from the overuse of corporate and personal income taxes, which are the most damaging to economic growth, and toward consumption taxes. The government would cut corporate and personal income tax marginal rates (see Mintz, Laurin, and Dahir 2026). It would also end the steep marginal corporate income tax rate corporations face if they try to grow beyond the definition of a small business.

A federal government plan would feature a comprehensive review of spending with a value-for-money perspective. Programs that could not be reformed to deliver intended outcomes efficiently would be scrapped. The results of the review would be made public to Canadians. The resulting action would need to be sweeping, such as gradually raising the age of entitlement for Old Age Security (OAS) and lowering the income threshold at which OAS payments are clawed back. Programs like $10-a-day childcare would be reformed to recognize that a crisis of affordability has become a crisis of accessibility. Business subsidies should be cut back drastically, as many simply transfer income rather than address market failure. Only about 20 percent of subsidies boost real income (Lester 2026). Supply management in agriculture should be reformed, not to appease the United States, but to raise productivity and lower prices in Canada. Supply management need not be scrapped. The focus should be on greater flexibility in quotas and caps on subsidized prices.

A serious approach would also recommit to environmental objectives, including lower greenhouse gas emissions that contribute to climate change. It is not fashionable of late to speak of environmental objectives, as many countries emphasize economic growth. But the future of the planet and its people depends upon reducing emissions. And this need not come at the expense of economic growth. Putting more emphasis on clean growth would be a start. The focus lately seems to be all on the development of fossil fuels and getting them to markets. But the combined global market value of clean energy technologies has grown about 20 percent per year over the past decade. Ironically, two of the world’s largest emitters lead in several dimensions of clean growth. China tops the world in clean energy infrastructure, and the United States invested over US$278 billion in clean energy and transportation in 2025 alone. Canada does not have to match their scale to capture a portion of the prize; it just has to identify and focus on existing competitive advantages (Drummond, Philips and Harland 2026). We now have a National Electricity Strategy. But it does not have nearly the buzz of the attention being given to fossil fuel development.

Government plans would recognize that Canada’s post-secondary education system can be a bedrock for people’s prosperity and well-being gains. Ontario has finally lifted the freeze on tuition. But by 2025, the initial cut and subsequent freeze had brought real (after-inflation) tuition in Ontario 26.6 percent below the 2018 level. That loss in real value is locked in for the foreseeable future. The February 2026 Ontario announcement raises grants by about $1 billion per year, but by 2027/28, they will still be more than 10 percent below 2015/16 in real terms per eligible student (Drummond 2026).

Institutions should be allowed greater flexibility on tuition. The after-inflation value of Ontario and federal grants for research should be restored and be better aligned with the economic transformation the province and Canada must accomplish. Governments should provide incentives to commercialize university-based research. Universities should be allowed to enrol more foreign students with proper accountability and objectives in place. The recent increase in the income requirements for foreign students is a good first step to curtail abuse, which was never widespread in universities, and should be complemented by ending foreign students’ ability to work off campus.

The Endgame and How to Get There

Canada has allowed itself to become too dependent on the United States and has ignored our domestic vulnerabilities for far too long. We are now paying the price. But by addressing the challenges, we can get to an endgame of a new economic and fiscal model that has a stronger, more resilient, and diverse economy with stable finances. The goal should be nothing less than being better off than we have ever been.

What will it take to get to this endgame?

  • An honest recognition of the economic and fiscal challenges.
  • A comprehensive plan.
  • Transparency with Canadians about the problems and the plan, sparking national discussion, debate, and hopefully, consensus on action.
  • A willingness to act.
  • Speed in acting, but patience with the inevitable lags in realizing improvements.

Conclusion: Let’s Act Now

Actions such as those recommended above always meet resistance as too controversial to be supported by the Canadian public and, hence, politicians, or too difficult to pull off within our system of federalism. But that may only be true if Canadians are not fully apprised of the seriousness of Canada’s economic and fiscal challenges. With such unfiltered information and a plan to ensure Canada’s prosperity, Canadians would likely offer widespread support, as they have in response to previous national challenges.

We must get serious and act now.

Edited remarks delivered to the School of Policy Studies, Queen’s University, on September 4, 2026. By Don Drummond

The author extends gratitude to Alexandre Laurin and Daniel Schwanen for valuable comments and suggestions. The author retains responsibility for any errors and the views expressed.

Don Drummond is a Fellow-in-Residence at the C.D. Howe Institute and a Stauffer-Dunning Fellow, School of Policy Studies, at Queen’s University.

References

Diez, Federico J., and Yuanchen Yang. 2026. “Canada Can Grow Faster by Unlocking Its Own Market.” International Monetary Fund. January 27. https://www.imf.org/en/news/articles/2026/01/27/cf-canada-can-grow-faster-by-unlocking-its-own-market.

Drummond, Don. 2025. “Shaken by Tariffs, Still Weak from Within: Canada Needs a New Economic and Fiscal Model.” Verbatim. Toronto: C.D. Howe Institute. September 4. https://cdhowe.org/publication/shaken-by-tariffs-still-weak-from-within-canada-needs-a-new-economic-and-fiscal-model/.

_____________. 2026. “Ontario Stops Deepening its Universities’ Financial Pit.” Intelligence Memo. Toronto: C.D. Howe Institute. March 6. https://cdhowe.org/publication/ontario-stops-deepening-its-universities-financial-pit/.

Drummond, Don, Alexandre Laurin, and William B.P. Robson. 2026. 2026 Shadow Budget. Commentary. Toronto: C.D. Howe Institute. Forthcoming.

Drummond, Don, and Parisa Mahboubi. 2026. “Resetting Expectations: Canada’s Economy in a Lower-Immigration Era.” E-Brief 383. Toronto: C.D. Howe Institute. May. https://cdhowe.org/publication/resetting-expectations-canadas-economy-in-a-lower-immigration-era/.

Drummond, Don, Peter Philips, and Kate Harland. 2026. “Canada Doesn’t Need to Abandon Climate Efforts in the Name of Growth or Unity.” The Hill Times. September 7.

Future Skills Centre. 2024. Waiting for Takeoff: The Short-Term Impact of AI Adoption on Firm Productivity. December.

Mintz, Jack, Alexandre Laurin, and Nicholas Dahir. 2026. “Big Bang” Tax Reform: Unleashing Growth in the Canadian Economy. Commentary 707. Toronto: C.D. Howe Institute. https://cdhowe.org/publication/big-bang-tax-reform-unleashing-growth-in-the-canadian-economy/.

Munro, Grady, Jake Fuss, and Joel Emes. 2026. Squandering the Canadian Century Part 1: Comparing Economic Performance in Canada and the United States. Fraser Institute. September 1. https://www.fraserinstitute.org/studies/squandering-canadian-century-part-1-comparing-economic-performance-canada-and-united-states.

Terrazzano, Franco. 2026. “Cost of Federal Bureaucracy Up 80 Per Cent in 10 Years: PBO.” Canadian Taxpayers Federation. February 17.

Vegh, George, and Kate Koplovich. 2026. Clear the Way: Does the Building Canada Act Help Canada Build? Commentary 728. Toronto: C.D. Howe Institute. September. https://cdhowe.org/publication/clear-the-way-does-the-building-canada-act-help-canada-build/.

Pas tout à fait les États-Unis, mais les défis budgétaires du Canada ne peuvent être ignorés

16 septembre 2026 – Sans changement de cap, la faible croissance et l’augmentation des dépenses entraîneront une stagnation du niveau de vie des Canadiens, tout en transférant la majeure partie de la dette actuelle aux jeunes générations et aux générations futures, selon un nouveau Verbatim de l’Institut C.D. Howe.

Dans « The Endgame: Time to Act on Canada’s Economic and Fiscal Challenges », l’auteur Don Drummond avertit que la faible productivité du Canada, la contre-performance de ses revenus, sa dépendance excessive à l’égard des marchés américains et ses vulnérabilités intérieures ne sont pas suffisamment prises au sérieux. Il recommande un plan économique qui vise à rétablir la stabilité budgétaire et à créer une économie plus forte, plus résiliente et plus diversifiée.


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Politics

World Economic Forum 56th Annual Meeting Has Spirit Of Dialogue Theme

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Chief Economists Perceive Relative Resilience but Remain Concerned about Asset Prices, Debt and Geoeconomic Tensions

Acknowledging the relative resilience of the global economy amid turbulence, 53% of chief economists surveyed expect global economic conditions to weaken in the year ahead, down from 72% in September 2025.Uncertainty around technology remains high, with 52% expecting AI-related stocks to decline and 40% expecting gains. On growth, expectations diverge by region, with economists expecting strong momentum in South Asia and East Asia and weak to moderate growth in Europe.

On macroeconomics, nearly a third of respondents are concerned about sovereign debt crises in advanced economies and nearly half in emerging economies; over 60% expect governments to rely on higher inflation and tax revenues to manage elevated debt.Learn more about the Chief Economists’ Outlook here.

Follow the Annual Meeting 2026 here and on social media using #WEF26.

Geneva, Switzerland, January 2026 – The global economic outlook has improved modestly but remains uncertain, with asset valuations, mounting debt, geoeconomic realignment and rapid artificial intelligence deployment creating both opportunities and risks, according to the World Economic Forum’s latest Chief Economists’ Outlook, published today. Although 53% of chief economists expect global economic conditions to weaken in the year ahead, this marks a significant improvement from the 72% who held this view in September 2025.
 
“The Chief Economists survey reveals three defining trends for 2026: surging AI investment and its implications for the global economy; debt approaching critical thresholds with unprecedented shifts in fiscal and monetary policies; and trade realignments,” said Saadia Zahidi, Managing Director, World Economic Forum. “Governments and companies will have to navigate an uncertain near-term environment with agility while continuing to build resilience and invest in the long-term fundamentals of growth.”
 
AI and other asset valuations are under scrutiny
Concentrated AI stock gains are splitting the views of the chief economists. A narrow majority (52%) are expecting AI-related US stocks to decline over the next year, but 40% foresee further increases. Should values fall sharply, 74% believe impacts would spread across the global economy. Cryptocurrencies face bleaker prospects, with 62% anticipating further declines following market turbulence, while 54% believe gold has peaked after recent rallies.
 
When it comes to the potential expected returns from AI, there is wide variation across regions and sectors. Roughly four in five chief economists expect productivity gains within two years in the US and China. Chief economists expect the information technology sector to adopt AI fastest, with nearly three-quarters anticipating imminent productivity gains. Financial services, supply chain, healthcare, engineering and retail follow as “fast-movers”, with one to two-year timelines. By firm size, the chief economists expect companies with 1,000+ employees to see gains earlier than others: 77% of chief economists expect meaningful productivity gains within two years.
 
The employment picture in relation to AI is expected to evolve over time: two thirds expect modest job losses over the next two years, but views diverge sharply over the longer term: 57% anticipate net losses over 10 years, while 32% foresee gains as new occupations emerge.
 
Debt may drive difficult trade-offs
Managing elevated debt levels has become a central challenge for policy-makers, particularly as spending pressures rise. Defence spending is almost unanimously expected to increase, with 97% of chief economists anticipating rises in advanced economies and 74% in emerging markets. Digital infrastructure and energy spending are also expected to rise. Most other sectors are expected to see stable levels of spending, while a majority of surveyed economists anticipate spending on environmental protection to decline in both advanced (59%) and emerging economies (61%).
 
Views are split equally on the likelihood of sovereign debt crises in advanced economies, while nearly half (47%) see them as likely in the year ahead in emerging economies. A large majority of chief economists expect governments to rely on higher inflation to reduce burdens (67% in advanced economies, 61% in emerging markets). Tax increases are also viewed as likely by 62% for advanced economies and 53% for emerging markets. Some 53% of chief economists anticipate seeing debt restructuring or default as a debt management strategy in emerging markets over five years, compared to just 6% for advanced economies.
 
Trade flows and regional growth outlooks are realigning
Global trade and investment are adjusting to a new, competitive reality. Chief economists expect import tariffs between the US and China to remain mostly stable, though competition could intensify in other domains. Some 91% expect US tech export restrictions to China to remain or increase; 84% anticipate the same for Chinese critical mineral restrictions.
 
In this new context, 94% of chief economists expect more bilateral trade deals and 69% anticipate growth in regional trade agreements. Some 89% expect Chinese exports into non-US markets to further increase, while surveyed economists are split on the future of global trade volumes. Meanwhile, almost half of them foresee the continued rise of international investment flows, and 57% expect FDI into the US to increase compared to 9% who expect increased inflows to China.
 
When it comes to growth expectation among the chief economists surveyed, South Asia leads with 66% anticipating strong or very strong performance, driven by robust growth in India. Some 45% expect strong growth and 55% moderate growth in East Asia and the Pacific. Some 36% expect strong growth and 64% moderate growth in the MENA region. The US outlook improved notably, with 69% expecting moderate growth versus 49% in September 2025, but only 11% expecting strong growth. China faces mixed prospects, with 47% expecting moderate growth and 24% strong growth and nearly an equal number – 29% – expecting weak growth. Europe confronts the weakest outlook, with 53% expecting weak growth, 44% moderate growth, and only 3% anticipating strong growth.
 
About the Chief Economists’ Outlook
The report builds on extensive consultations and surveys with chief economists from the public and private sectors, organized by the World Economic Forum’s Centre for the New Economy and Society. The report supports the Forum’s Future of Growth Initiative, aiming to foster dialogue and actionable pathways to sustainable and inclusive economic growth. The Chief Economists’ Outlook is complemented by other recent publications with economic foresight. Four Futures for the New Economy and Four Futures for Jobs in the New Economy explore strategic implications for businesses navigating geopolitical shifts, technology disruption and workforce transformation through 2030, offering indicators to track and strategies to prepare for multiple scenarios.
 
About the Annual Meeting 2026
The World Economic Forum’s 56th Annual Meeting, taking place today the 19th and running until 23 January 2026 in Davos-Klosters, Switzerland, will convene leaders from business, government, international organizations, civil society and academia under the theme, A Spirit of Dialogue. Click here to learn more.
 
A Spirit of Dialogue Brings Record Numbers of World Leaders to Davos for World Economic Forum Annual Meeting 2026

A record 400 top political leaders, including close to 65 heads of state and government – with six G7 leaders expected – nearly 850 of the world’s top CEOs and chairs, and almost 100 leading unicorns and technology pioneers will convene in Davos-Klosters for one of the highest-level gatherings in the Annual Meeting’s history.  Held under the theme of A Spirit of Dialogue, the 56th Annual Meeting will provide an impartial platform for close to 3,000 participants from over 130 countries to navigate the major economic, geopolitical and technological forces reshaping the global landscape.

A major focus will be on the unprecedented speed of innovation and technological advancement with key voices from industry and academia present.– At a pivotal moment for global cooperation, the World Economic Forum will convene its 56th Annual Meeting today in Davos-Klosters, Switzerland, bringing together close to 3,000 cross-sector leaders from over 130 countries under the theme A Spirit of Dialogue. Marking record levels of governmental participation, 400 top political leaders – including close to 65 heads of state and government and six of the G7’s leaders – are expected to take part, alongside nearly 850 of the world’s top CEOs and chairpersons, and almost 100 leading unicorns and technology pioneers.  
 
Amid the most complex geopolitical backdrop in decades – marked by rising fragmentation and rapid technological change – the need for an impartial platform that brings together diverse and sometimes diverging voices across industries, regions, and generations is urgent. Building on the Forum’s long-standing tradition of providing a trusted space for dialogue and public-private collaboration, the Annual Meeting 2026 will enable an open exchange of ideas and perspectives on the issues that matter most to people, economies and the planet, turning shared understanding into action.
 
“Dialogue is not a luxury in times of uncertainty; it is an urgent necessity,” said Børge Brende, President and CEO, World Economic Forum. “At a critical juncture for international cooperation – marked by profound geoeconomic and technological transformation – this year’s Annual Meeting will be one of our most consequential. With historic levels of participation, it will provide a space for an unparalleled mix of global leaders and innovators to work through and look beyond divisions, gain insight into a fast-shifting global landscape, and advance solutions to today’s and tomorrow’s biggest and most pressing challenges.”
 
“As the World Economic Forum enters its next chapter, this year’s Annual Meeting is bringing together a record number of global leaders from government, business, and non-governmental organizations at a moment when dialogue matters more than ever,” said Larry Fink, Interim Co-Chair, World Economic Forum. “Understanding different perspectives is essential to driving economic progress and ensuring prosperity is more broadly shared.”
 
“At a moment when cooperation matters more than ever, the Annual Meeting provides a unique space to turn dialogue into meaningful progress,” said André Hoffmann, Interim Co-Chair, World Economic Forum. “By bringing together leaders across regions and sectors, it creates the conditions to rebuild trust, align priorities and advance solutions that support long-term, sustainable growth for all, within planetary boundaries.”
 
Switzerland is the host country for the meeting. 400 government leaders are expected to attend this year, representing the highest level of government participation in the Annual Meeting’s history, including close to 65 heads of state and government, 55 ministers for economy and finance, 33 ministers for foreign affairs, 34 ministers for trade, commerce and industry, and 11 Governors of Central Banks. High-level government representation is expected from all key regions, including six G7 leaders and heads of state from countries central to dialogue on critical global situations – from Ukraine to Gaza and the broader Middle East, and beyond.   
  
Top political leaders taking part include:
 
Top political leaders taking part include: Donald Trump, President of the United States of America; Mark Carney, Prime Minister of Canada; Friedrich Merz, Federal Chancellor of Germany; Ursula von der Leyen, President of the European Commission;  He Lifeng, Vice-Premier of the People’s Republic of China; Javier Milei, President of Argentina; Prabowo Subianto, President of Indonesia; Pedro Sánchez, Prime Minister of Spain; Guy Parmelin, President of the Swiss Confederation 2026; Vahagn Khachaturyan, President of the Republic of Armenia; Ilham Aliyev, President of the Republic of Azerbaijan; Bart De Wever, Prime Minister of Belgium; Gustavo Petro, President of Colombia; Félix-Antoine Tshisekedi Tshilombo, President of the Democratic Republic of the Congo; Daniel Noboa Azín, President of Ecuador; Alexander Stubb, President of Finland; Kyriakos Mitsotakis, Prime Minister of Greece; Micheál Martin, Taoiseach, Ireland; Aziz Akhannouch, Head of Government, Kingdom of Morocco; Daniel Francisco Chapo, President of Mozambique; Dick Schoof, Prime Minister of the Netherlands; Mian Muhammad Shehbaz Sharif, Prime Minister of Pakistan; Mohammed Mustafa, Prime Minister of the Palestinian National Authority; Karol Nawrocki, President of Poland; Mohammed Bin Abdulrahman Al Thani, Prime Minister and Minister of Foreign Affairs of the State of Qatar; Aleksandar Vučić, President of Serbia; Tharman Shanmugaratnam, President of Singapore; Isaac Herzog, President of the State of Israel; Ahmad Al Sharaa, President of Syria; Volodymyr Zelenskyy, President of Ukraine.     
 
Heads of international organizations taking part include:
 
António Guterres, Secretary-General of the United Nations; Ngozi Okonjo-Iweala, Director-General of the World Trade Organization; Ajay S. Banga, President of the World Bank Group; Kristalina Georgieva, Managing Director of the International Monetary Fund; Mark Rutte, Secretary-General of the North Atlantic Treaty Organization; Tedros Adhanom Ghebreyesus, Director-General of the World Health Organization; Alexander De Croo, Administrator of the United Nations Development Programme; Mathias Cormann, Secretary-General of the Organisation for Economic Co-operation and Development; Doreen Bogdan-Martin, Secretary-General of the International Telecommunication Union; Barham Salih, UN High Commissioner for Refugees; Jasem Al Budaiwi, Secretary-General of the Gulf Cooperation Council. 
 
Around 1,700 business leaders, including close 850 of the world’s top CEOs and chairpersons from the World Economic Forum’s Members and Partners, will also participate, alongside almost 100 CEOs and chairpersons of Unicorn companies and Tech Pioneers who are transforming industries and shaping the future or technology worldwide.
 
Some of the top voices in technology and innovation taking part include:
 
Jensen Huang, NVIDIA; Satya Nadella, Microsoft; Dario Amodei, Anthropic; Dina Powell McCormick, Meta; Demis Hassabis, Google DeepMind; Yoshua Bengio, Université de Montréal; Alex Karp, Palantir Technologies; Sarah Friar, OpenAI; Yuval Harari, Centre for the Study of Existential Risk; Khaldoon Khalifa Al Mubarak, Mubadala; Peggy Johnson, Agility Robotics; Arthur Mensch, Mistral AI; Bret Taylor, Sierra; Peng Xiao, G42; Eric Xing, Mohamed bin Zayed University of Artificial Intelligence.
 
“In an era where exponential technological innovation and geopolitical disruption are deeply intertwined, the need for constructive dialogue between policy-makers and industry is clear,” said Mirek Dušek, Managing Director, World Economic Forum. “Leaders will share views from across sectors to help build the understanding needed to balance short-term priorities and immediate challenges with long-term value creation.”
 
Close to 200 leaders from civil society and the social sector – including labour unions, non-governmental and faith-based organizations, as well as experts and heads of the world’s leading universities, research institutions and think tanks – will also participate in the meeting.
 
Heads of civil society organizations participating include: 
 
David Miliband, President and CEO, International Rescue Committee; Sania Nishtar, CEO, Gavi, The Vaccine Alliance; Luc Triangle, General Secretary, International Trade Union Confederation; Kirsten Schuijt, Secretary General, WWF International; Mohammad Al-Issa, Secretary General, Muslim World League; Comfort Ero, President and CEO, International Crisis Group; Pinchas Goldschmidt, Chief Rabbi and President, Conference of European Rabbis; Oleksandra Matviichuk, Nobel Peace Laureate and Chair, Ukraine Center for Civil Liberties; Peter Sands, Executive Director, The Global Fund; Amitabh Behar, Executive Director, Oxfam International; Aulani Wilhelm, President and Executive Director, Nia Tero.
 
 
The 2026 programme is centred around five pressing global challenges where public-private dialogue and cooperation, involving all stakeholders, are critical for collective progress:How can we cooperate in a more contested world?How can we unlock new sources of growth?How can we better invest in people?How can we deploy innovation at scale and responsibly?How can we build prosperity within planetary boundaries?  “In a global economy shaped by technology, geoeconomics, and demographics, the defining challenge will be whether opportunity is broadly shared or if growth remains sluggish and uneven,” said Saadia Zahidi, Managing Director, World Economic Forum. “The meeting will connect leaders to discuss how to unlock growth, jobs and economic transformation that translate into progress for communities everywhere.
“The meeting’s Arts and Culture Programme will further amplify the diversity of voices and perspectives needed to advance impact, while showcasing the power of art, influence, and culture to drive change and create unique space for dialogue.
 
Renowned artistic and cultural leaders in attendance include:
 
Marina Abramović, Jon Batiste, Thijs Biersteker, Sabrina Elba, Renaud Capuçon, Hiro Iwamoto, Suleika Jaouad, Sir David Beckham, Ahmad Joudeh, Yo-Yo Ma, Emi Kusano, Harvey Mason Jr, Hans Ulrich Obrist, Katie Piper, Ronen Tanchum, JR and will.i.am.
 
The Open Forum, now in its 23rd year, will host public panel discussions for the local community and participants from around the world, encouraging wider participation and open dialogue on key global issues.