Canada's economy is facing significant challenges, including a downturn in GDP, rising unemployment, and a housing crisis, all rooted in deep structural weaknesses that require comprehensive reforms.

The OECD highlights issues such as declining real GDP per capita, stagnant productivity growth, a housing affordability crisis, and an overreliance on U.S. trade, which makes Canada vulnerable to tariffs and geopolitical shocks.

Over the past two decades, Canada's labor productivity growth has been about 0.8% annually—half that of the U.S.—largely due to reliance on lower-productivity immigrants and underinvestment in capital.

The housing market has deteriorated, with prices up 120% since 2007, driven by restrictive zoning, permitting delays, labor shortages in construction, and demographic pressures from rapid immigration.

In 2025, Canada's GDP shrank by 1.6% in the second quarter, and August saw a loss of 66,000 jobs, pushing the unemployment rate to 7.1%, the highest since 2016 outside the pandemic period.

To address these issues, policy recommendations include easing zoning restrictions through provincial 'right-to-build' policies, reforming immigration to better match labor market needs, and expanding trade infrastructure and interprovincial trade to reduce dependence on the U.S.

Canada's trade model is highly concentrated, with over 75% of exports going to the U.S., exposing the economy to tariff risks and geopolitical disruptions, while internal trade barriers hinder diversification and growth.

Addressing Canada's productivity, trade fragility, and housing dysfunction requires large-scale reforms in tax policy, immigration, infrastructure, and zoning to promote investment, innovation, and sustainable growth.